Positive (negative) earnings surprises do not necessarily generate positive (negative) market reactions. In our sample from 1990 to 2010, the market reacts negatively to 42 % of firms that meet or beat analyst forecasts and positively to 41 % of firms that miss analyst forecasts. We empirically tests whether ‘other information’, in part, accounts for the opposite sign between market reactions and earnings surprises. Our results indicate that ‘other information’ is a significant explanatory factor for the opposite market reactions to earnings surprises, and that its explanatory power is greater when investors become skeptical of the reliability of earnings information. We also find that other information facilitates investors’ assessments for earnings information because the market under-reaction to earnings information decreases in the availability of other information disseminated to investors. Investors, however, do not fully comprehend other information and tend to overestimate the persistence of other information for future earnings.
Review of Quantitative Finance and Accounting – Springer Journals
Published: May 1, 2014
It’s your single place to instantly
discover and read the research
that matters to you.
Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.
All for just $49/month
Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly
Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.
All the latest content is available, no embargo periods.
“Whoa! It’s like Spotify but for academic articles.”@Phil_Robichaud