References (69)


Citations (41)



Soft Information in Earnings Announcements: News or Noise?

Elizabeth A. Demers

University of Virginia - Darden School of Business

Clara Vega

Board of Governors of the Federal Reserve System

May 11, 2010

INSEAD Working Paper No. 2010/33/AC

This paper examines whether, and under what conditions, the “soft” information contained in the text of management’s quarterly earnings press releases is incrementally informative over company-issued “hard” information. We use several textual-analysis programs to extract various dimensions of managerial net optimism from more than 20,000 corporate earnings announcements over the period 1998 to 2006 and document that unanticipated net optimism in managers’ language affects announcement period abnormal returns and predicts post-earnings announcement drift. We further find, consistent with economic theory, that two key aspects of the information environment influence the price-responsiveness to net optimism: (i) the informativeness of the contemporaneously available hard information; and (ii) the likely credibility of the net optimism itself. We also show that the second moment of soft information, the level of uncertainty in the text, attenuates the market’s response to earnings announcement surprises, is associated with contemporaneous announcement period idiosyncratic volatility, and predicts future idiosyncratic volatility incrementally to “hard” information.

Number of Pages in PDF File: 70

Keywords: Soft Information, Earnings Announcements, Post-earnings Drift, Cheap Talk, Languge Tone, Earnings Quality, Information Uncertainty, Momentum, Voluntary Disclosure

JEL Classification: M41, M45, G14, G29, D82

working papers series

Download This Paper

Date posted: June 30, 2008 ; Last revised: May 11, 2010

Suggested Citation

Demers, Elizabeth A. and Vega, Clara, Soft Information in Earnings Announcements: News or Noise? (May 11, 2010). INSEAD Working Paper No. 2010/33/AC. Available at SSRN: http://ssrn.com/abstract=1153450 or http://dx.doi.org/10.2139/ssrn.1153450

Contact Information

Elizabeth A. Demers (Contact Author)
University of Virginia (UVA) - Darden School of Business ( email )
P.O. Box 6550
Charlottesville, VA 22906-6550
United States
Clara Vega
Board of Governors of the Federal Reserve System ( email )
20th Street and Constitution Avenue NW
Washington, DC 20551
United States
HOME PAGE: http://www.federalreserve.gov/research/staff/vegaclarax.htm
Feedback to SSRN

Paper statistics
Abstract Views: 2,191
Downloads: 531
Download Rank: 4,993
References:  69
Citations:  41

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo5 in 0.579 seconds