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

Financial Markets and Portfolio Management, Vol. 25, No. 4, pp. 379-409, 2011

Posted: 7 Dec 2011

See all articles by Nandkumar (Nandu) Nayar

Nandkumar (Nandu) Nayar

Lehigh University - College of Business

Ajai K. Singh

Department of Finance, University of Central Florida

Wen Yu

University of St. Thomas - Opus College of Business

Date Written: October 5, 2011

Abstract

We examine a sample of Value Line’s timeliness rank upgrades that occur immediately following earnings announcements and find that pre-event price momentum has significant incremental explanatory power for post-event drift, after controlling for the level of earnings surprise. Therefore, the stock price drift following Value Line’s timeliness upgrades cannot be viewed as driven only by the post-earnings announcement drift phenomenon. Instead, these findings indicate that, among other factors, Value Line has been exploiting the price momentum effect for decades. Black (Financial Analysis Journal 29:10–14, 1973) clearly stated that it does indeed do this, but his assertion has not yet been verified as an explanation of the puzzling drift that follows Value Line rank upgrades.

Keywords: value line timeliness ranks, post-earnings announcement drift, upgrades, post-upgrade drift, momentum

JEL Classification: G14

Suggested Citation

Nayar, Nandkumar (Nandu) and Singh, Ajai K. and Yu, Wen, Unraveling a Puzzle: The Case of Value Line Timeliness Rank Upgrades (October 5, 2011). Financial Markets and Portfolio Management, Vol. 25, No. 4, pp. 379-409, 2011 , Available at SSRN: https://ssrn.com/abstract=1969329

Nandkumar (Nandu) Nayar (Contact Author)

Lehigh University - College of Business

Bethlehem, PA 18015
United States

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

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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