Underreaction to Industry-Wide Earnings and the Post-Forecast Revision Drift

• 成果类型: Article
• 署名作者: Hui, Kai Wai; Yeung, P. Eric
• 署名单位: Hong Kong University of Science & Technology; Cornell University
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12006
• 发表日期: 2013
• 页码: 701-737
• 关键词: ANNOUNCEMENT DRIFT; FULLY REFLECT; stock-prices; Cash flows; ANALYST; INFORMATION; MARKET; persistence; recommendations; investors

摘要

We test whether the post-forecast revision drift is mainly attributable to investors' underreaction to industry-wide earnings news conveyed by analysts' forecast revisions. We find a large drift associated with industry-wide earnings news but no drift associated with firm-specific earnings news. Consistent with the functional fixation hypothesis, we provide evidence that the post-forecast revision drift is driven by investors' underreaction to the higher persistence of industry-wide earnings. Although prior research has focused on differential persistence of earnings components stemming from managerial reporting discretion, we provide evidence suggesting that investors do not fully understand the differential earnings persistence attributable to industry fundamentals.