Suppressed Negative Information and Future Underperformance

Posted: 8 Aug 2008

Multiple version iconThere are 2 versions of this paper

Date Written: 2008


I present evidence of inefficient information processing in equity markets by documenting that negative information withheld by securities analysts is incorporated in stock prices with a significant delay. I estimate the extent of the withheld negative information based on the proportion of analysts who stop revising their annual earnings forecasts. This measure predicts negative earnings surprises and negative price reaction around earnings announcements. It could also be used to generate profitable trading strategies. I show that institutions tend to sell their stock holdings as my measure of unreported negative news increases, thus ameliorating the mispricing.

Keywords: G12, G14, G20

Suggested Citation

Scherbina, Anna D., Suppressed Negative Information and Future Underperformance (2008). Review of Finance, Vol. 12, Issue 3, pp. 533-565, 2008, Available at SSRN: or

Anna D. Scherbina (Contact Author)

Brandeis University ( email )

415 South Street
Waltham, MA 02453
United States


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