NDLI: ‘Other information’ as an explanatory factor for the opposite market reactions to earnings surprises

Content Provider	Springer Nature Link
Author	Chen, Vincent Y. S. Tiras, Samuel L.
Copyright Year	2014
Abstract	Positive (negative) earnings surprises do not necessarily generate positive (negative) market reactions. In our sample from 1990 to 2010, the market reacts negatively to 42 % of firms that meet or beat analyst forecasts and positively to 41 % of firms that miss analyst forecasts. We empirically tests whether ‘other information’, in part, accounts for the opposite sign between market reactions and earnings surprises. Our results indicate that ‘other information’ is a significant explanatory factor for the opposite market reactions to earnings surprises, and that its explanatory power is greater when investors become skeptical of the reliability of earnings information. We also find that other information facilitates investors’ assessments for earnings information because the market under-reaction to earnings information decreases in the availability of other information disseminated to investors. Investors, however, do not fully comprehend other information and tend to overestimate the persistence of other information for future earnings.
Starting Page	757
Ending Page	784
Page Count	28
File Format	PDF
ISSN	0924865X
Journal	Review of Quantitative Finance and Accounting
Volume Number	45
Issue Number	4
e-ISSN	15737179
Language	English
Publisher	Springer US
Publisher Date	2014-05-01
Publisher Place	New York
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Other information Analyst forecast Opposite market reaction Finance/Investment/Banking Accounting/Auditing Econometrics Operations Research/Decision Theory
Content Type	Text
Resource Type	Article
Subject	Finance Accounting

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