The Speed of Earnings Anticipation: Evidence from Daily Analyst Forecasts

58 Pages Posted: 29 Jun 2019

See all articles by Nathan T. Marshall

Nathan T. Marshall

University of Colorado at Boulder - Department of Accounting

Date Written: June 27, 2019

Abstract

Short-term earnings news is monitored by a wide variety of firm constituents; however, our understanding of the forces that facilitate or limit the speed of earnings anticipation is limited. I create a measure of speed – inspired by the price discovery literature – that captures how quickly the daily consensus analyst earnings forecast approaches the actual earnings as the quarter unfolds. I document wide variation in the speed of earnings anticipation and examine the determinants of faster or slower earnings anticipation and the economic consequences associated with differential speed. I show that the speed of earnings anticipation is increasing in ex-ante information search and earnings information flow proxies, and decreasing in proxies for the difficulty of the forecasting task. Furthermore, I provide evidence that earnings are anticipated more quickly in bad news quarters than in good news quarters. I also show that this asymmetry in speed is decreasing as the earnings news gets large (i.e., earnings are anticipated faster as good news gets large and slower as bad news gets large). Finally, I document important market consequences – in terms of greater absolute market returns around the earnings announcement and more pronounced post-earnings announcement drift – for firm quarters with slow, relative to those with fast, speed of earnings anticipation.

Keywords: Earnings anticipation; speed; earnings news; analyst forecasts

Suggested Citation

Marshall, Nathan T., The Speed of Earnings Anticipation: Evidence from Daily Analyst Forecasts (June 27, 2019). Available at SSRN: https://ssrn.com/abstract=2795160 or http://dx.doi.org/10.2139/ssrn.2795160

Nathan T. Marshall (Contact Author)

University of Colorado at Boulder - Department of Accounting ( email )

419 UCB
Boulder, CO 80309-0419
United States

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