Download This PaperDeterminants and Consequences of Information Processing Delay: Evidence from the Thomson Reuters Institutional Brokers’ Estimate System
58 Pages Posted: 28 Oct 2016 Last revised: 10 Oct 2018
Date Written: February 6, 2017
Abstract
We present new evidence that highlights the role of information intermediaries in the distribution and processing of earnings estimates in capital markets. We find that the time taken to activate an analyst’s earnings forecast in the Thomson Reuters Institutional Brokers’ Estimate System is related to measures of investor demand for timely information processing, processing difficulty, and limited attention. Furthermore, we find that forecast announcement returns are muted and post-announcement drift is magnified for forecasts with longer unexpected activation delay and that market inefficiency is concentrated in neglected stocks and is potentially exploitable. Finally, analyzing intra-day returns, we find that activations facilitate price discovery.
Keywords: Information intermediaries, information processing, limited attention, information distribution, price discovery
JEL Classification: G10, G20
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