The New York Times and Wall Street Journal: Does Their Coverage of Earnings Announcements Cause “Stale” News to Become “New” News?

Recent research suggests that the stock market reacts to stale information if it is reported in the media because it is gives the impression of being “new” news. The objective of this study is to provide a unique test of this hypothesis using the time-series properties of quarterly earnings. It is well documented that seasonally differenced quarterly earnings for adjacent quarters are positively correlated. Therefore a component of current quarter earnings when reported is news that was known or predictable at the end of the prior quarter and thus is old news. We find for those firms that receive media coverage in the Wall Street Journal and The New York Times that the price reaction at the time of the announcement of current earnings to past quarter's seasonally differenced quarterly earnings is greater than those firms that do not receive media coverage. The result is consistent with stale earnings information being given the appearance of new information resulting in a further price reaction. This suggests that the stale information hypothesis and media coverage could be a partial explanation for post-earnings announcement drift.     

Information advantage,short sales,and stock returns: Evidence from short selling reform in China

We study short selling around earnings announcements and examine the potential sources of their information. Using unique daily aggregate short selling transactions in China, we find that short sellers significantly increase (decrease) their short positions before negative (positive) earnings surprise. In addition, abnormal high short selling is significantly associated with negative post-earnings announcement stock returns. The findings suggest that short sellers, on average, are informed and sophisticated traders and they can exploit profitable opportunities contained in earnings announcements. Finally, we find that stocks with poor governance or more insiders have higher (lower) abnormal short selling in negative (positive) earnings surprise, indicating private information leakage from firms with weak governance; which is consistent with the tipping argument. Our findings have important policy implications for capital market regulation in China.     

盈余信息披露、投资者行为与市场内幕交易

本文以2008—2017年的季报、半年报和年报盈余公告信息为研究对象,利用Fama MacBeth横截面回归方法考察了公司高管和机构投资者的内幕交易行为。研究发现：（1）我国股票市场的盈余漂移异象在盈余公告前后具有明显的非对称性,股价倾向于在盈余公告前（后）对“好（坏）消息”反应过度、对“坏（好）消息”反应不足;（2）盈余公告前,机构投资者的资金净流入（出）与公司的未预期盈余之间呈显著正相关关系;（3）盈余漂移异象在不同板块之间存在明显的分化效应,在盈余公告前,主板市场对“好消息”的反应程度弱于中小板和创业板,而在盈余公告后正好相反。     

The Effect of Annual Earnings Announcements on the Chinese Stock Markets

This paper examines the annual earnings announcement effect of the stock markets in China. The investigation is based on events analysis and carried out by modeling the daily changes of stock returns using the M-EGARCH approach, by testing the news effects of annual earnings announcement on the conditional mean of abnormal return and the variance of the returns. It is found that a higher than expected earnings announcement leads to a rise in the conditional mean of stock returns on days before the news announcement and a fall afterwards. The conditional volatility of the changes are significantly reduced by bigger absolute values of reported earnings before the news announcement and increased afterwards, supporting the rejection of semi-strong-form efficiency.     

An Investigation of Analysts' Praise of Management During Earnings Conference Calls

Through the textual analysis of a large sample of earnings conference calls, the authors find that analysts praise management on over half of earnings conference calls by saying complimentary phrases such as “congratulations on the great quarter.” The results show that analysts' complimentary phrases reflect the nature of the information released at the earnings announcement. The authors find that the amount of praise by analysts on an earnings conference call is strongly associated with the earnings surprise and to a greater extent the earnings announcement stock return. They also find that there is value to investors in tracking analysts' flattery of management during earnings conference calls, as it predicts abnormal stock returns over the following quarter. The findings, which are incremental to prior research on the tone of earnings conference calls, highlight a previously ignored aspect of analyst feedback.     

Corrigendum to “On randomized matching mechanisms” [Economic Theory 8(1996)377–381]

Ma (in Econ. Theory 8, 377–381, 1996) studied the random order mechanism, a matching mechanism suggested by Roth and Vande Vate (Econometrica 58, 1475–1480, 1990) for marriage markets. By means of an example he showed that the random order mechanism does not always reach all stable matchings. Although Ma's (1996) result is true, we show that the probability distribution he presented – and therefore the proof of his Claim 2 – is not correct. The mistake in the calculations by Ma (1996) is due to the fact that even though the example looks very symmetric, some of the calculations are not as “symmetric.” We thank two anonymous referees for their helpful comments. B. Klaus’s and F. Klijn’s research was supported by Ramón y Cajal contracts of the Spanish Ministerio de Ciencia y Tecnología. The work of the authors was also partially supported through the Spanish Plan Nacional I+D+I (BEC2002-02130 and SEJ2005-01690) and the Generalitat de Catalunya (SGR2005-00626 and the Barcelona Economics Program of CREA).     

Does Social Media Get Your Attention?

The author investigates how social media affects stock prices and post–earnings announcement drift in response to companies’ quarterly earnings announcements. Using quarterly earnings data as well Twitter and StockTwits data, the author utilizes Twitter volume and a residual methodology to generate an attention proxy that is orthogonal to the growth of Twitter accounts. The author finds that the new attention brought by social media after the earnings announcements positively affects the cumulative abnormal returns. Further, even companies reporting bad news can still have positive immediate cumulative abnormal returns if they attract enough attention from investors after an earnings announcement. The new attention effects are different in both magnitudes and statistical significance between social media popular and unpopular industries.     

Market efficiency and investors' adjustments to asset valuation errors

Market participants are hypothesized to form expectations of future earnings by a process of adjustments to new earnings information while taking into account the pattern of errors in past judgements. Using an ‘adaptive expectations’ model, 140 New York Stock Exchange sample firms were classified as over- or undervalued based on earnings on announcement date versus market expectations. Comparing the risk-adjusted returns of the over- and undervalued securities for two four-year test periods, the conclusion is drawn that the securities market reacts to earnings announcements efficiently.     

Liquidity-adjusted conditional capital asset pricing model

This paper derives a liquidity-adjusted conditional two-moment capital asset pricing model (CAPM) and a liquidity-adjusted conditional three-moment CAPM respectively based on theory of stochastic discount factor. The liquidity-adjusted conditional two-moment CAPM shows that a security's conditional expected excess return consists of three parts: its conditional expected liquidity cost, the systemic risk premium and the liquidity risk premium. The liquidity-adjusted conditional three-moment CAPM shows that a security's conditional expected excess return depends on its conditional expected liquidity cost, the conditional covariance between its return and the market return, the conditional covariance between its liquidity cost and the market liquidity cost, and the conditional coskewness of its return and the market return.     

Analysis on structural changes in the macroeconomic data series with the empirical evidence from China

Analysis on structural changes in macroeconomic data series has been the key issue for studying data quality. This paper studies the structural changes in China’s 36 macroeconomic time series using joint estimation model, and we find out the characteristics and movement pattern for the outliers. Our results show that most outliers show up more or less in groups, indicating that there is a significant correlation between them. The isolated outliers are not the main characteristic of China’s macroeconomic time series. Nearly all the original series contain the obvious skewness and kurtosis; hence, the hypothesis of normality is significantly rejected. Most original and outlier correction series show the non-autoregressive conditional heteroskedasticity (ARCH) characteristic, but the p value for ARCH2, ARCH4, and ARCH8 is very different. __________ Translated from Economic Research Journal (经济研究), 2005, (1) (in Chinese)     

Value Relevance of Earnings in an Emerging Capital Market: the Case of A-shares in China

This study investigates the value relevance of earnings in the emerging capital market of China by examining the information content of accounting earnings measured under the People's Republic of China Accounting Standards (PRC-GAAP). Based on the A-shares of listed Chinese firms during 1994–97, a significant association is observed between annual market-adjusted stock return and the change of earnings. Also documented is a significant price reaction to the annual earnings announcement in a three-day window centered around the announcement date. Overall, the empirical results suggest that earnings reported in China are value-relevant to A-share investors.     

Consumption,wealth and business cycles in Germany

This paper studies the long-run relationship between consumption, asset wealth and income—the consumption–wealth ratio—based on German data from 1980 to 2003. We find that departures from this long-run relationship mainly predict adjustments in income. The German consumption–wealth ratio also contains considerable forecasting power for a range of business cycle indicators, including the unemployment rate. This finding is in contrast to earlier studies for some of the Anglo-Saxon economies that have shown that the consumption–wealth ratio reverts to its long-run mean mainly through subsequent adjustments in asset prices. While the German consumption wealth ratio contains little information about future changes in German asset prices, we report that the U.S. consumption–wealth ratio has considerable forecasting power for the German stock market. One explanation of these findings is that in Germany—due to structural differences in the financial and pension systems—the share of publicly traded equity in aggregate household wealth is much smaller than in the Anglo-Saxon countries. We discuss the implications of our results for the measurement of a potential wealth effect on consumption. The views expressed in this paper are those of the authors and do not reflect the position of the Deutsche Bundesbank. We gratefully acknowledge comments and suggestions from an anonymous referee as well as from Heinz Herrmann, Helmut Lütkepohl, the editor, Baldev Raj, Burkhard Raunig, Monika Schnitzer, Harald Uhlig and Christian Upper. We also benefitted from comments by seminar participants at the ECB, the Deutsche Bundesbank, the CESifo Macro, Money and International Finance Area Conference 2005, the EEA 2005 annual congress and at the 2005 IAEA Meetings. Last but not least, we would like to thank Mark Weth for very useful information concerning the construction of the financial wealth data. Hoffmann’s work on this paper is also part of the project The International Allocation of Risk funded by Deutsche Forschungsgemeinschaft in the framework of SFB 475. Responsibility for any remaining errors and shortcomings is entirely our own.     

我国盈利公告效应的动态特征

国外对盈利公告效应(earnings announcement effect)的研究得出两条规律:(1)提前依次异动:股价不仅在盈利公告当日依次变动,而且之前已提早反应。(2)后动有序持续:股价的走势在公告后较长时间内依然不变。这两条规律在我国也存在吗?本文旨在探索上述市场规律,寻找我国盈利公告效应的动态特征。我们运用事件分析法考察了1998—2000年闻沪市对上市公司盈利公告的反应。结果发现,上述两条规律在我国均有不同形式的体现。首先,股价确有提前异动,但仅限于盈利有增长的公司,其原因并非完全出于市场预期,却不排除有消息泄露的可能性。其次,股价亦有后动持续现象,但相当无序,表现最佳的竟为盈利最差的公司,其股价在公告之后大幅上涨;究其原因,它与我国特有的宝贵"壳资源"现象关系密切。     

Benchmarking Corporate Social Responsibility within Spanish Companies

In this paper, the authors focus on the influence of corporate social responsibility (CSR) upon business profitability. In order to be capable of working with homogeneous data, the authors’ starting point is to use the criteria defined by PricewaterhouseCoopers’ work on the subject, and published by the Spanish journal Actualidad Económica. In this work, an index was created which assigns between one and five points to the companies depending on the importance given by them to CSR. The CSR measurement published by the Observatorio de la RSE will also be considered. In order to measure companies’ profitability, this paper will take into account their return on equity (ROE) and return on assets (ROA) of 2005 and 2006. The authors’ purpose is to demonstrate that the relationship between CSR and business profitability is neutral.

Labour segregation and immigrant and native-born wage distributions in Spain: an analysis using matched employer–employee data

This article carries out an empirical examination of the origin of the differences between immigrant and native-born wage structures in the Spanish labour market. Special attention is given in the analysis to the role played by occupational and workplace segregation of immigrants. Legal immigrants from developing countries exhibit lower mean wages and a more compressed wage structure than native-born workers. By contrast, immigrants from developed countries display higher mean wages and a more dispersed wage structure. The main empirical finding is that the disparities in the wage distributions for the native-born and both groups of immigrants are largely explained by their different observed characteristics, with a particularly important influence in this context of workplace and, specially, occupational segregation. Hipólito Simón, Esteban Sanromá and Raúl Ramos wish to thank the support received from the Ministerio de Fomento and the Ministerio de Educación y Ciencia through the projects T 75/2006 (Plan Nacional de Investigación, Desarrollo e Innovación Científica), SEJ2004-05860/ECON and SEJ2005-04348/ECON, respectively. A previous version of this paper was published as an IVIE Working Paper (WP-EC 2007-03).     

Introducing the mini-futures contract on Ibex 35: implications for price discovery and volatility transmission

This paper analyzes the effects of the introduction of the mini-futures contract in the Spanish stock index futures market. The objective of the paper is twofold: (a) to analyze the potential destabilizing effect of the mini futures trading activity on the distribution of spot returns, and (b) to test whether the mini futures contract significantly contributes to the price discovery process. A non-parametric approach is used to estimate the density function of spot return conditional to both spot and futures trading volume. Empirical findings using 15-min intraday data reveal that the mini futures trading activity enhances the price discovery function of the derivative market and does not destabilize spot prices. A preliminary version of this paper has been previously published as a working paper of the Instituto Valenciano de Investigaciones Económicas, WP-EC 2004-13. M. Illueca and Juan A. Lafuente acknowledge financial support from Spanish ministry of Science and Technology through grants SEJ-2005-02776, and both SEJ2006-14354 and BEC-2003-03965, respectively.     

The Consumption/Wealth and Book/Market Ratios in a Dynamic Asset Pricing Contex

This paper addresses new insights into the predictability of financial returns. In particular, we analyze two aspects of the controversial forecasting literature. On the one hand, we demonstrate a positive and contemporaneous link between aggregate book/market and consumption/wealth ratios. On the other hand, we show that real estate and human capital, as the present value of all future salaries, are key components of the consumption/wealth ratio in Spain. Specifically, we find that the cointegrating residuals of consumption, asset holdings, real estate holdings, and our measure of human capital provide a better forecast of future returns than does the standard proxy of the consumption/wealth ratio. This result is important because it clarifies the importance of country-specific components of wealth for cases in which the consumption/wealth ratio is employed as an instrument in conditional asset pricing models.Belén Nieto: Financial support from the Ministerio de Ciencia y Tecnología grant SEJ2005-09372 is gratefully acknowledged.Rosa Rodríguez: Financial support from the Ministerio de Ciencia y Tecnología grant SEC2003-06457 is gratefully acknowledged.     

农村劳动力迁移与中国工资收入不平等的地区差异:来自2005年全国人口抽样调查的证据

利用2005年全国1%人口抽样调查数据研究中国各地区农村劳动力流动和地区(县/区)内部工资性收入不平等的关系。中国地区间的差异是个人工资收入不平等最突出的决定因素,而地区内不平等程度也存在着很大的差别。农村劳动力人口的迁入有助于降低区内的收入不平等,而迁出则起相反的作用,而且这两种作用在县、县级市和市辖区间存在着显著差别。在研究中国劳动力流动与地区内和地区间的不平等关系时,应该从迁入、迁出两个角度分析其影响,并将城乡分割的二元劳动力市场状况考虑进来。     

Forward induction and entry deterrence: an experiment

The Dixit (Econ J 90:95–106, 1980) hypothesis that incumbents use investment in capacity to deter potential entrants has found little empirical support. Bagwell and Ramey (J Econ 27:660–680, 1996) propose a model where, in the unique game-theoretic prediction based on forward induction or iterated elimination of weakly-dominated strategies, the incumbent does not have the strategic advantage. We conduct an experiment with games inspired by these models. In the Dixit-style game, the incumbent monopolizes the market most of the time even without the investment in capacity. In our Bagwell-and-Ramey-style game, the incumbent also tends to keep the market, in contrast to the predictions of an entrant advantage. Nevertheless, we find strong evidence that forward induction affects the behavior of most participants. The results of our games suggest that players perceive that the first mover has an advantage without having to pre-commit capacity. In our Bagwell–Ramey game, evolution and learning do not drive out this perception. We back these claims with data analysis and a theoretical framework for dynamics. Financial support by the Spanish Ministerio de Ciencia and Tecnología (SEC2002-01352 and SEJ2006-11665-C02-01) and the Barcelona Economic Program of CREA and excellent research assistance by David Rodríguez are gratefully acknowledged. The authors thank Aurora García Gallego and Armin Schmutzler for helpful comments.     

Rolling Regression Analysis of the Pástor-Stambaugh Model: Evidence from Robust Instrumental Variables

The capital asset pricing model (CAPM), Fama-French (FF), and Pástor-Stambaugh (PS) factor models are examined using a new dynamic rolling regression version of the generalized method of moments (GMM) method. This rolling regression framework not only allows us to investigate phases of the business cycle, but also permits regression estimates to vary through time due to changes in the development and efficiency of the sectors. The principal reasons for using the dynamic GMM with robust instruments is that some of these factors are measured with errors and the disturbances may be non-spherical. The CAPM appears as the most parsimonious model to explain the FF sector returns. Furthermore, the rolling GMM approach is clearly more sensitive to dynamic financial episodes than the ordinary least squares approach. In particular, liquidity has some anticipatory power, as it is able to forecast the 2007–2009 crises with heightened volatility starting in late 2005.