Earnings Surprise, Market Efficiency, and Expectations |
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| Authors: | John C. Alexander Jr. |
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| Affiliation: | Clemson University, Clemson, SC 29634–1323. The author wishes to thank Pamela P. Peterson, David R. Peterson, and two anonymous referees for helpful comments. The author also thanks the advisory service of Lynch, Jones &Ryan, members of the New York Stock Exchange, for supplying the data from the Institutional Brokers Estimate System. The data have been provided as part of a broad academic program to encourage earnings expectations research. |
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| Abstract: | The examination of both the analysts' consensus and simple forecast models over a single sample provides a better understanding of the link between unexpected earnings and security prices. Analysts' attention is found to reduce the value of the annual earnings announcement to the investor. This suggests that the earnings announcement of firms not followed by analysts contains more information relative to those firms followed by analysts. Further, the examination of the market response to the annual earnings announcement, with respect to either model, fails to detect the pricing anomaly observed in many previous studies. |
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