Does earnings guidance affect market returns? The nature and information content of aggregate earnings guidance

Does earnings guidance affect market returns? The nature and information content of aggregate... We investigate whether earnings guidance affects aggregate stock returns through its effects on expectations about overall earnings performance and/or aggregate expected returns. We find that aggregate guidance, especially relative levels of quarterly downward guidance, is associated with analyst- and time-series-based measures of aggregate earnings news. We find more modest evidence that guidance, again, largely downward guidance, is associated with market returns—market returns appear to respond to guidance toward the end of each calendar quarter, when most earnings preannouncements are released, and there is some evidence that firm-level guidance affects market returns in short windows around its release. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting and Economics Elsevier

Does earnings guidance affect market returns? The nature and information content of aggregate earnings guidance

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Publisher
Elsevier
Copyright
Copyright © 2006 Elsevier B.V.
ISSN
0165-4101
D.O.I.
10.1016/j.jacceco.2006.09.002
Publisher site
See Article on Publisher Site

Abstract

We investigate whether earnings guidance affects aggregate stock returns through its effects on expectations about overall earnings performance and/or aggregate expected returns. We find that aggregate guidance, especially relative levels of quarterly downward guidance, is associated with analyst- and time-series-based measures of aggregate earnings news. We find more modest evidence that guidance, again, largely downward guidance, is associated with market returns—market returns appear to respond to guidance toward the end of each calendar quarter, when most earnings preannouncements are released, and there is some evidence that firm-level guidance affects market returns in short windows around its release.

Journal

Journal of Accounting and EconomicsElsevier

Published: Sep 1, 2007

References

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