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Author | : Douglas J. Skinner |
Publisher | : |
Total Pages | : 59 |
Release | : 1999 |
Genre | : |
ISBN | : |
Download Earnings Surprises, Growth Expectations, and Stock Returns Book in PDF, ePub and Kindle
It is well-established that the realized returns of ?growth? stocks have been low relative to other stocks. We show that this phenomenon is explained by a large and asymmetric response to negative earnings surprises for growth stocks. After controlling for this effect, there is no longer evidence of a stock return differential between growth stocks and other stocks. Our evidence is more consistent with investors having naively optimistic expectations about the prospects of growth stocks (e.g., Lakonishok, Shleifer, and Vishny, 1994) than with the existence of unidentified risk factors that are lower for growth stocks (e.g., Fama and French, 1992).
Author | : Jeffrey T. Doyle |
Publisher | : |
Total Pages | : |
Release | : 2008 |
Genre | : |
ISBN | : |
Download The Extreme Future Stock Returns Following I/B/E/S Earnings Surprises Book in PDF, ePub and Kindle
We investigate the stock returns subsequent to quarterly earnings surprises, where the benchmark for an earnings surprise is the consensus analyst forecast. By defining the surprise relative to an analyst forecast rather than a time-series model of expected earnings, we document returns subsequent to earnings announcements that are much larger, persist for much longer, and are more heavily concentrated in the long portion of the hedge portfolio than shown in previous studies. We show that our results hold after controlling for risk and previously documented anomalies, and are positive for every quarter between 1988 and 2000. Finally, we explore the financial results and information environment of firms with extreme earnings surprises and find that they tend to be 'neglected' stocks with relatively high book-to-market ratios, low analyst coverage, and high analyst forecast dispersion. In the three subsequent years, firms with extreme positive earnings surprises tend to have persistent earnings surprises in the same direction, strong growth in cash flows and earnings, and large increases in analyst coverage, relative to firms with extreme negative earnings surprises. We also show that the returns to the earnings surprise strategy are highest in the quartile of firms where transaction costs are highest and institutional investor interest is lowest, consistent with the idea that market inefficiencies are more prevalent when frictions make it difficult for large, sophisticated investors to exploit the inefficiencies.
Author | : Jeffrey T. Doyle |
Publisher | : |
Total Pages | : 41 |
Release | : 2006 |
Genre | : |
ISBN | : |
Download The Extreme Future Stock Returns Following Extreme Earnings Surprises Book in PDF, ePub and Kindle
We investigate the stock returns subsequent to large quarterly earnings surprises, where the benchmark for an earnings surprise is the consensus analyst forecast. By defining the surprise relative to an analyst forecast rather than a time-series model of expected earnings, we document returns subsequent to earnings announcements that are much larger, persist for much longer, and are more heavily concentrated in the long portion of the hedge portfolio than shown in previous studies. We show that our results hold after controlling for risk and previously documented anomalies, and are positive for every quarter between 1988 and 2000. Finally, we explore the financial results and information environment of firms with extreme earnings surprises and find that they tend to be quot;neglectedquot; stocks with relatively high book to market ratios, low analyst coverage, and high analyst forecast dispersion. In the three subsequent years, firms with extreme positive earnings surprises tend to have persistent earnings surprises in the same direction, strong growth in cash flows and earnings, and large increases in analyst coverage, relative to firms with extreme negative earnings surprises.
Author | : Narasimhan Jegadeesh |
Publisher | : |
Total Pages | : 42 |
Release | : 2002 |
Genre | : |
ISBN | : |
Download Revenue Growth and Stock Returns Book in PDF, ePub and Kindle
This paper examines the relation between revenue surprises and future stock returns. It also investigates how analysts update their earnings forecasts following announcements of revenue and earnings surprises. The results indicate that the stock price reaction on the earnings announcement date is significantly related to both revenue surprises and earnings surprises. I also find significant abnormal returns in the post announcement period for stocks that have large revenue surprises, after controlling for earnings surprises. Although analysts revise their forecasts of future earnings in response to revenue and earnings surprises, they are slow to incorporate all the information in their forecast revisions. In particular analysts underestimate the extent to which revenue and earnings surprises have permanent effects on future earnings.
Author | : Jonathan Lewellen |
Publisher | : |
Total Pages | : 42 |
Release | : 2009 |
Genre | : |
ISBN | : |
Download Stock Returns, Aggregate Earnings Surprises, and Behavioral Finance Book in PDF, ePub and Kindle
We study the stock market reaction to aggregate earnings news. Previous research shows that, for individual firms, stock prices react positively to earnings news but require several quarters to fully reflect the information in earnings. We find that the relation between returns and earnings is substantially different in aggregate data. First, returns are unrelated to past earnings, suggesting that prices neither underreact nor overreact to aggregate earnings news. Second, aggregate returns are negatively correlated with concurrent earnings; over the last 30 years, stock prices increased 6.5% in quarters with negative earnings growth and only 1.9% otherwise. This finding suggests that earnings and discount rates move together over time, and provides new evidence that discount-rate shocks explain a significant fraction of aggregate stock returns.
Author | : S. P. Kothari |
Publisher | : |
Total Pages | : 68 |
Release | : 2003 |
Genre | : |
ISBN | : |
Download Stock Returns, Aggregate Earnings Surprises, and Behavioral Finance Book in PDF, ePub and Kindle
We study the stock market reaction to aggregate earnings news. Previous research shows that, for individual firms, stock prices react positively to earnings news but require several quarters to fully reflect the information in earnings. We find that the relation between returns and earnings is substantially different in aggregate data. First, returns are unrelated to past earnings, suggesting that prices neither underreact nor overreact to aggregate earnings news. Second, aggregate returns are negatively correlated with concurrent earnings; over the last 30 years, stock prices increased 6.5% in quarters with negative earnings growth and only 1.9% otherwise. This finding suggests that earnings and discount rates move together over time, and provides new evidence that discount-rate shocks explain a significant fraction of aggregate stock returns. JEL Classification: G12, G14, M41.
Author | : Roger Loh |
Publisher | : |
Total Pages | : 34 |
Release | : 2013 |
Genre | : |
ISBN | : |
Download Streaks in Earnings Surprises and the Cross-section of Stock Returns Book in PDF, ePub and Kindle
The gambler's fallacy (Rabin, 2002) predicts that trends bias investor expectations. Consistent with this prediction, we find that investors underreact to streaks of consecutive earnings surprises with the same sign. When the most recent earnings surprise extends a streak, post-earnings announcement drift is strong and significant. In contrast, the drift is negligible following the termination of a streak. Indeed, streaks explain about half of the post-earnings announcement drift in our sample. Our results are robust to more general definitions of trends than streaks and a battery of control variables including the magnitude of earnings surprises and their autocorrelation. Overall, post-earnings announcement drift has a significant time-series component that is consistent with the gambler's fallacy.
Author | : Alina Lerman |
Publisher | : |
Total Pages | : |
Release | : 2008 |
Genre | : |
ISBN | : |
Download Double Surprise into Higher Future Returns Book in PDF, ePub and Kindle
Post-earnings-announcement drift is the well-documented ability of earnings surprises to predict future stock returns. Despite nearly four decades of research, little has been written about the importance of how earnings surprise is actually measured. We compare the magnitude of the drift when historical time-series data are used to estimate earnings surprise with the magnitude when analyst forecasts are used. We show that the drift is significantly larger when analyst forecasts are used. Furthermore, we show that using the two models together does a better job of predicting future stock returns than using either model alone.
Author | : Weihong Xu |
Publisher | : |
Total Pages | : 132 |
Release | : 2001 |
Genre | : |
ISBN | : |
Download Market Revaluation to Warnings of Negative Earnings Surprises Book in PDF, ePub and Kindle
Author | : Brian R. Bruce |
Publisher | : Irwin Professional Publishing |
Total Pages | : 398 |
Release | : 1994 |
Genre | : Business & Economics |
ISBN | : |
Download The Handbook of Corporate Earnings Analysis Book in PDF, ePub and Kindle