Competing Earnings Announcements: Which Announcement Do Investors Process First?

2015 ◽  
Vol 91 (2) ◽  
pp. 441-462 ◽  
Author(s):  
James R. Frederickson ◽  
Leon Zolotoy
Keyword(s):  
Institutional Investors ◽  
Earnings Announcements ◽  
Additional Analysis ◽  
Limited Attention ◽  
Market Response ◽  
Individual Investors ◽  
Expected Cost ◽  
Earnings Announcement ◽  
Unexpected Earnings ◽  
Post Earnings Announcement Drift

ABSTRACT Consistent with investors having limited attention, we posit that when faced with competing earnings announcements, investors behave as if they queue the announcements based on a firm or earnings announcement attribute. We focus on two potential queuing attributes: (1) firm visibility, and (2) the expected cost of processing the earnings announcements. We find no support for queuing based on the latter, but find a statistically significant and economically meaningful queuing effect based on firm visibility. Earnings announcements made by firms that are more visible than a given firm—but not by firms that are less visible—mitigate the announcement window market response to that firm's unexpected earnings, with a corresponding magnification in its post-earnings announcement drift. Further, the effects of visibility-based queuing are more pronounced for days with greater clustering of earnings announcements. Additional analysis suggests that individual investors—not institutional investors—drive the queuing effect.

Stock Price Behavior Associated with Post-1974–75 LIFO Adoptions Announced at Alternative Disclosure Times

1996 ◽  
Vol 11 (4) ◽  
pp. 535-564 ◽  
Author(s):  
Morton Pincus ◽  
Charles E. Wasley
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Earnings Announcements ◽  
Market Response ◽  
Price Behavior ◽  
Positive Information ◽  
Earnings Announcement ◽  
Earnings Growth ◽  
Adoption Decision ◽  
Annual Earnings

We examine the behavior of stock prices at the time of post-1974–75 LIFO adoption announcements. We exploit recent theoretical and empirical developments in the LIFO adoption literature in an attempt to resolve some of the mixed findings in Hand (1993). We study LIFO adoptions announced prior to as well as at the time of annual earnings announcements. Previous research has mostly centered on 1974–75 adoptions made at the time of annual earnings announcements. Our study of LIFO adoptions announced prior to annual earnings announcement dates enables us to provide evidence on whether the early announcement of a LIFO adoption is used by firms to signal positive information about earnings growth. Collectively, our results suggest that in explaining the market response to LIFO adoption announcements, extant models of the LIFO adoption decision do not fully capture the richness of differing inflationary environments or of alternative disclosure times.

scholarly journals Overconfident Institutions and Their Self-Attribution Bias: Evidence from Earnings Announcements

2020 ◽  
pp. 1-33 ◽  
Author(s):  
Hsin-I Chou ◽  
Mingyi Li ◽  
Xiangkang Yin ◽  
Jing Zhao
Keyword(s):  
Information Asymmetry ◽  
Earnings Announcements ◽  
Earnings Announcement ◽  
Behavioral Bias ◽  
Price Pressure ◽  
Post Earnings Announcement Drift ◽  
Institutional Demand ◽  
Attribution Bias

Abstract Institutional demand for a stock before its earnings announcement is negatively related to subsequent returns. The relation is not attributable to the price pressure of institutional demand and is stronger for stocks with higher information asymmetry and/or greater valuation difficulty. These findings support the notion that overconfident institutions misprice stocks. Following announcements, institutions’ behavior exhibits the outcome-dependent feature of self-attribution bias. Whether they become more overconfident and delay their mispricing correction depends on whether earnings news confirms their preannouncement trades. This behavioral bias also offers a new explanation for the well-known post-earnings-announcement drift.

scholarly journals The Effect of Ex Ante Management Forecast Accuracy on the Post-Earnings-Announcement Drift

2012 ◽  
Vol 87 (5) ◽  
pp. 1791-1818 ◽  
Author(s):  
Li Zhang
Keyword(s):  
Earnings Announcements ◽  
Forecast Accuracy ◽  
Data Availability ◽  
Management Forecasts ◽  
Composite Measure ◽  
Earnings Announcement ◽  
Post Earnings Announcement Drift ◽  
Management Forecast ◽  
Ex Ante

ABSTRACT I examine the effect of ex ante management forecast accuracy on the post-earnings-announcement drift when management forecasts about next quarter's earnings are bundled with current quarter's earnings announcements. I build a composite measure of ex ante management forecast accuracy that takes into account forecast ability, forecast difficulty, and forecast environment. The results show that the bundled forecasts with higher ex ante accuracy mitigate investors' under-reaction to current earnings and reduce the magnitude of the post-earnings-announcement drift. Data Availability: The data used in this paper are available from the sources listed in the text.

Herding on Earnings News: The Role of Institutional Investors in Post–Earnings-Announcement Drift

2017 ◽  
Vol 32 (4) ◽  
pp. 536-560 ◽  
Author(s):  
Linda H. Chen ◽  
Wei Huang ◽  
George J. Jiang
Keyword(s):  
Stock Returns ◽  
Institutional Investors ◽  
Stock Prices ◽  
Institutional Trading ◽  
Earnings Announcement ◽  
Post Earnings Announcement Drift ◽  
Gradual Process ◽  
Earnings Surprises ◽  
Institutional Herding

We examine the role of institutional investors underlying post–earnings-announcement drift (PEAD). Our results show that while institutional investors generally herd on earnings news, such correlated trading among institutions does not eliminate or reduce market underreaction to earnings surprises. Instead, PEAD is significant only in the subsample of stocks where institutions herd in the same direction as earnings surprises. In fact, institutional herding is also positively related to next-quarter earnings announcement returns. We provide evidence that institutional herding on or against earnings news is largely driven by firm characteristics, particularly past firm performance and stock returns. In addition, we find that relative to nontransient institutions, transient institutions have a stronger tendency to herd on earnings information. Finally, based on long-run stock returns, we show that when institutions herd on earnings surprises, institutional trading represents a gradual process of incorporating information into stock prices. However, when institutions herd against earnings surprises, institutional trading slows down stock price discovery.

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