Abstract

http://ssrn.com/abstract=930697
 
 

References (43)



 
 

Citations (15)



 


 



Management Forecast Credibility and Underreaction to News


Jeffrey Ng


Singapore Management University - School of Accountancy

A. Irem Tuna


London Business School

Rodrigo S. Verdi


Massachusetts Institute of Technology (MIT)

March 1, 2012


Abstract:     
In this paper, we first document evidence of underreaction to management forecast news. We then hypothesize that the credibility of the forecast influences the magnitude of this underreaction. Relying on evidence that more credible forecasts are associated with a larger reaction in the short window around the management forecasts and a smaller post-management forecast drift in returns, we show that the magnitude of the underreaction is smaller for firms that provide more credible forecasts. Our paper contributes to the literature by providing out-of-sample evidence of the drift in returns documented in the post-earnings-announcement drift literature, with the credibility of the news being one explanation for the phenomenon.

Number of Pages in PDF File: 49

Keywords: Market efficiency, Management forecasts, Earnings, Disclosure quality

JEL Classification: G12, G14, G30, M41

working papers series





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Date posted: September 15, 2006 ; Last revised: April 18, 2013

Suggested Citation

Ng, Jeffrey and Tuna, A. Irem and Verdi, Rodrigo S., Management Forecast Credibility and Underreaction to News (March 1, 2012). Available at SSRN: http://ssrn.com/abstract=930697 or http://dx.doi.org/10.2139/ssrn.930697

Contact Information

Jeffrey Ng
Singapore Management University - School of Accountancy ( email )
60 Stamford Road
Room 4008
Singapore, 178900
Singapore
+6568280543 (Phone)

Ayse Irem Tuna (Contact Author)
London Business School ( email )
Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom
Rodrigo S. Verdi
Massachusetts Institute of Technology (MIT) ( email )
Sloan School of Management
100 Main Street E62-679
Cambridge, MA 02142
United States
(617) 253 2956 (Phone)
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