Overreaction to Intra-Industry Information Transfers?

50 Pages Posted: 7 Dec 2006 Last revised: 12 Nov 2007

See all articles by Jacob K. Thomas

Jacob K. Thomas

Yale School of Management

Frank Zhang

Yale School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: November 5, 2007

Abstract

Prior research has documented that earnings announcements provide information not only about the announcing firm but also about other firms in the same industry. We document a stock market anomaly associated with this phenomenon of intra-industry information transfers by showing that the stock price movements of late announcers in response to earnings reported by early announcers are negatively correlated with the subsequent price responses of late announcers to their own earnings reports. Apparently, the stock market overestimates the intra-industry implications of early announcers' earnings for late announcers' earnings, and that overestimation is corrected when late announcers disclose their earnings.

Keywords: Intra-industry information transfer, market efficiency, stock returns, earnings surprises

JEL Classification: G12, G14, M41

Suggested Citation

Thomas, Jacob Kandathil and Zhang, Frank, Overreaction to Intra-Industry Information Transfers? (November 5, 2007). Available at SSRN: https://ssrn.com/abstract=1028285 or http://dx.doi.org/10.2139/ssrn.1028285

Jacob Kandathil Thomas

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

Frank Zhang (Contact Author)

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

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