Investor and analyst reactions to earnings announcements of related firms: An empirical analysis

Research output: Contribution to journalArticle

105 Scopus citations

Abstract

In this article I examine the response of investors and analysts of nonannouncing firms to the earnings report of the first announcers in the industry. The error in the earnings forecast of the first announcer is found to be informative about the errors in the contemporaneous earnings forecasts of subsequent announcers in the industry. However, investors and analysts do not appear to fully incorporate the information from the first announcers' news in their revised earnings expectations for subsequent announcers. This apparent underreaction to the first announcers' news leads to predictable stock returns for subsequent announcers in the days following the first announcement. Results of this study can be seen as further evidence of investor and analyst underreaction to publicly available information.

Original languageEnglish (US)
Pages (from-to)1351-1376
Number of pages26
JournalJournal of Accounting Research
Volume40
Issue number5
DOIs
StatePublished - Dec 2002
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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