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

Research output: Contribution to journalArticle

99 Citations (Scopus)

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 - Jan 1 2002
Externally publishedYes

Fingerprint

Empirical analysis
Investors
Earnings announcements
Analysts
Industry
Underreaction
Earnings forecasts
News
Stock returns
Announcement

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

Investor and analyst reactions to earnings announcements of related firms : An empirical analysis. / Ramnath, Sundaresh.

In: Journal of Accounting Research, Vol. 40, No. 5, 01.01.2002, p. 1351-1376.

Research output: Contribution to journalArticle

@article{ca705dff5c1b43d2970ebd5f2c7ddaaf,
title = "Investor and analyst reactions to earnings announcements of related firms: An empirical analysis",
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.",
author = "Sundaresh Ramnath",
year = "2002",
month = "1",
day = "1",
doi = "10.1111/1475-679X.t01-1-00057",
language = "English (US)",
volume = "40",
pages = "1351--1376",
journal = "Journal of Accounting Research",
issn = "0021-8456",
publisher = "Wiley-Blackwell",
number = "5",

}

TY - JOUR

T1 - Investor and analyst reactions to earnings announcements of related firms

T2 - An empirical analysis

AU - Ramnath, Sundaresh

PY - 2002/1/1

Y1 - 2002/1/1

N2 - 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.

AB - 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.

UR - http://www.scopus.com/inward/record.url?scp=0036913732&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=0036913732&partnerID=8YFLogxK

U2 - 10.1111/1475-679X.t01-1-00057

DO - 10.1111/1475-679X.t01-1-00057

M3 - Article

AN - SCOPUS:0036913732

VL - 40

SP - 1351

EP - 1376

JO - Journal of Accounting Research

JF - Journal of Accounting Research

SN - 0021-8456

IS - 5

ER -