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| Author | : John C. Alexander (Jr.) |
| Publisher | : |
| Total Pages | : 378 |
| Release | : 1991 |
| Genre | : Dividends |
| ISBN | : |
| Author | : Arianna S. Pinello |
| Publisher | : |
| Total Pages | : 40 |
| Release | : 2007 |
| Genre | : |
| ISBN | : |
Archival studies document an asymmetrically strong market reaction to positive vis-agrave;-vis negative earnings surprises. This finding appears inconsistent with the well-known effect of loss aversion and remains unexplained. I contend that this reaction pattern can arise when investors' earnings expectations do not coincide with analyst forecasts. Numerous studies document optimistic biases in analyst forecasts. If investors perceive optimistic biases in analyst forecasts, their earnings expectations will be lower than analyst forecasts. Because the contrast between the obtained and the expected outcome determines the degree of perceived surprise, an investor expectation which is below the analyst forecast results in a larger (smaller) perceived earnings surprise than reported when the surprise is positive (negative). Investors' lower expectations relative to analyst forecasts therefore result in a stronger reaction to positive than to negative reported earnings surprises of equivalent magnitude. In a controlled experiment, I replicate the asymmetrically strong reaction to positive reported earnings surprises, and trace this reaction pattern to investors' perceptions of these surprises. I further show that when earnings surprises are measured based on investors' perception of those surprises, the differential reaction pattern reverses: investors react asymmetrically strong to negative vis-agrave;-vis positive perceived earnings surprises, consistent with loss aversion. My findings carry implications for investors and accounting researchers.
| Author | : Ki Choong Han |
| Publisher | : |
| Total Pages | : 318 |
| Release | : 1990 |
| Genre | : Corporate profits |
| ISBN | : |
| Author | : Gia Chevis |
| Publisher | : |
| Total Pages | : 50 |
| Release | : 2008 |
| Genre | : |
| ISBN | : |
We measure the market's assessment of the information in a particular earnings surprise by calculating a firm- and time-specific earnings response coefficient (FTERC). We use the FTERC to infer the market's expectation of the persistence of unexpected earnings and also develop an interpretive framework. Examining the market's response to a particular earnings surprise - rather than whether it, on average, over- or underreacts - allows researchers to use the FTERC as a dependent variable (e.g. in a study of disclosure quality) or as a control when each response is unique (e.g. a firm before, during and after fraud). Our model implies seven classifications of expected persistence: growing, permanent, decaying, transitory, partially offsetting, offsetting, and subsuming. We find that approximately 1 in 4 earnings announcements results in an FTERC within the 'normal' permanent-to-transitory range; over 70% of expectation revisions are growing or subsuming.
| Author | : John Shon |
| Publisher | : FT Press |
| Total Pages | : 225 |
| Release | : 2011-03-09 |
| Genre | : Business & Economics |
| ISBN | : 0132615851 |
Profit from earnings announcements, by taking targeted, short-term option positions explicitly timed to exploit them! Based on rigorous research and huge data sets, this book identifies the specific earnings-announcement trades most likely to yield profits, and teaches how to make these trades—in plain English, with real examples! Trading on Corporate Earnings News is the first practical, hands-on guide to profiting from earnings announcements. Writing for investors and traders at all experience levels, the authors show how to take targeted, short-term option positions that are explicitly timed to exploit the information in companies’ quarterly earnings announcements. They first present powerful findings of cutting-edge studies that have examined market reactions to quarterly earnings announcements, regularities of earnings surprises, and option trading around corporate events. Drawing on enormous data sets, they identify the types of earnings-announcement trades most likely to yield profits, based on the predictable impacts of variables such as firm size, visibility, past performance, analyst coverage, forecast dispersion, volatility, and the impact of restructurings and acquisitions. Next, they provide real examples of individual stocks–and, in some cases, conduct large sample tests–to guide investors in taking advantage of these documented regularities. Finally, they discuss crucial nuances and pitfalls that can powerfully impact performance.
| Author | : Benjamin Schmitt |
| Publisher | : GRIN Verlag |
| Total Pages | : 57 |
| Release | : 2015-06-02 |
| Genre | : Business & Economics |
| ISBN | : 3656972419 |
Bachelor Thesis from the year 2008 in the subject Business economics - Investment and Finance, grade: 1.1, EBS European Business School gGmbH (Finance), language: English, abstract: Many authors have already studied about stock price reactions after earnings announcements yet, which is because of the importance of earnings announcements, in particular quarterly earnings announcements, for many investors. However, all major studies concerning this topic deal with long-term scenarios, the stock’s price performance is measured for a time period of at least three quarters. Due to the fact that there are many investors, especially institutional investors such as hedge funds that trade stocks much more frequently, the existing studies are not relevant for them. This paper studies stock price reactions around quarterly earnings announcements for companies listed in Deutscher Aktienindex (DAX) or Midcap DAX (MDAX) with respect to changes of the company’s full-year outlook and of earnings surprise regarding analyst consensus forecast within ten days before and after the announcement date. Hence, this paper aims to analyse short-term reaction to quarterly earnings announcements, which are of relevance for all investors, whose investment strategy is, at least partially, focussing on the short-term performance. The main target group of this analysis are therefore hedge funds and investors that run short-term strategies. Due to the fact that the widespread Event Study Methodology is focused on the long-term, it is irrelevant for this analysis.
| Author | : Myung Chul Chung |
| Publisher | : |
| Total Pages | : 316 |
| Release | : 1991 |
| Genre | : Stock price forecasting |
| ISBN | : |
| Author | : Zhi-Xing Lin |
| Publisher | : |
| Total Pages | : 58 |
| Release | : 2007 |
| Genre | : |
| ISBN | : |
Manipulation of earnings or analyst earnings expectations is costly to firms. Manipulators of earnings and/or analyst earnings expectations therefore are likely to report earnings that precisely meet or narrowly beat analyst earnings forecasts, resulting in a zero or small positive earnings surprise. We predict that investors see such an earnings surprise as a red flag in their attempt to identify manipulators of earnings and/or analyst earnings expectations. Consistent with our prediction, we find the coefficient in the regression of abnormal stock returns on the earnings surprise (known in the literature as the earnings response coefficients or ERC) is significantly lower for zero and small positive earnings surprises than for earnings surprises in adjacent ranges. We find evidence that analysts see a zero or small positive earnings surprise as a red flag as well. The coefficient in the regression of analyst revisions of next-quarter earnings forecasts on the earnings surprise (the analyst ERC) is significantly lower for zero and small positive earnings surprises than for earnings surprises in adjacent ranges.
| Author | : Leonard Zacks |
| Publisher | : John Wiley & Sons |
| Total Pages | : 352 |
| Release | : 2011-08-24 |
| Genre | : Business & Economics |
| ISBN | : 1118127765 |
Investment pioneer Len Zacks presents the latest academic research on how to beat the market using equity anomalies The Handbook of Equity Market Anomalies organizes and summarizes research carried out by hundreds of finance and accounting professors over the last twenty years to identify and measure equity market inefficiencies and provides self-directed individual investors with a framework for incorporating the results of this research into their own investment processes. Edited by Len Zacks, CEO of Zacks Investment Research, and written by leading professors who have performed groundbreaking research on specific anomalies, this book succinctly summarizes the most important anomalies that savvy investors have used for decades to beat the market. Some of the anomalies addressed include the accrual anomaly, net stock anomalies, fundamental anomalies, estimate revisions, changes in and levels of broker recommendations, earnings-per-share surprises, insider trading, price momentum and technical analysis, value and size anomalies, and several seasonal anomalies. This reliable resource also provides insights on how to best use the various anomalies in both market neutral and in long investor portfolios. A treasure trove of investment research and wisdom, the book will save you literally thousands of hours by distilling the essence of twenty years of academic research into eleven clear chapters and providing the framework and conviction to develop market-beating strategies. Strips the academic jargon from the research and highlights the actual returns generated by the anomalies, and documented in the academic literature Provides a theoretical framework within which to understand the concepts of risk adjusted returns and market inefficiencies Anomalies are selected by Len Zacks, a pioneer in the field of investing As the founder of Zacks Investment Research, Len Zacks pioneered the concept of the earnings-per-share surprise in 1982 and developed the Zacks Rank, one of the first anomaly-based stock selection tools. Today, his firm manages U.S. equities for individual and institutional investors and provides investment software and investment data to all types of investors. Now, with his new book, he shows you what it takes to build a quant process to outperform an index based on academically documented market inefficiencies and anomalies.
| Author | : John Shon |
| Publisher | : Pearson Education |
| Total Pages | : 20 |
| Release | : 2011-03-16 |
| Genre | : Business & Economics |
| ISBN | : 0132659751 |
This Element is an excerpt from Trading on Corporate Earnings News: Profiting from Targeted, Short-Term Options Positions (9780137084920) by John Shon, Ph.D., and Ping Zhou, Ph.D. Available in print and digital formats. Two Line Description How to trade options before earning announcements — and profit whether the market raves or rages! Text Excerpt We’ve all seen perplexing market reactions to earnings announcements, but would you have guessed that this happens 40% of the time? Even if you predict the right direction of an earnings surprise, it’s still easy to lose money with a directional bet. So how can you profit from an earnings announcement? You use an options trading strategy called a “straddle.”
