Unraveling a Puzzle: The Case of Value Line Timeliness Rank Upgrades

37 Pages Posted: 17 Sep 2008

See all articles by Nandkumar Nayar

Nandkumar Nayar

Lehigh University - College of Business & Economics

Ajai K. Singh

Department of Finance, University of Central Florida

Wen Yu

University of St. Thomas - Opus College of Business

Date Written: September 1, 2008

Abstract

We examine a sample of Value Line's timeliness rank upgrades that occur immediately following earnings announcements and find that the pre-event price momentum has significant incremental explanatory power for the post-event drift, after controlling for the level of earnings surprise. Therefore, the drift following Value Line's timeliness upgrades of the stocks that it covers cannot be construed as a mere manifestation of the post-earnings announcement drift. Instead, these findings indicate that, among other factors, Value Line has been exploiting the price momentum effect for decades. Black (1973) had clearly stated that they do but his assertion has never been checked before to resolve the puzzling drift following Value Line rank upgrades.

Keywords: Value Line timeliness ranks, post-earnings announcement drift, upgrades, post-upgrade drift, momentum

JEL Classification: G14, G29, M41

Suggested Citation

Nayar, Nandkumar and Singh, Ajai K. and Yu, Wen, Unraveling a Puzzle: The Case of Value Line Timeliness Rank Upgrades (September 1, 2008). Available at SSRN: https://ssrn.com/abstract=1269421 or http://dx.doi.org/10.2139/ssrn.1269421

Nandkumar Nayar

Lehigh University - College of Business & Economics ( email )

621 Taylor Street, Rauch Business Center
Lehigh University
Bethlehem, PA 18015-3117
United States
610-758-4161 (Phone)
610-758-6429 (Fax)

Ajai K. Singh

Department of Finance, University of Central Florida ( email )

College of Business Administration
12744 Pegasus Drive
Orlando, FL 32816
United States
407-823-0761 (Phone)
407-823-6676 (Fax)

Wen Yu (Contact Author)

University of St. Thomas - Opus College of Business ( email )

2115 Summit Avenue
St. Paul, MN 55105
United States
651-962-5428 (Phone)
651-962-5093 (Fax)

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