Explaining Firms’ Signed Earnings Announcement Stock Returns Using FactSet and I/B/E/S Data Feeds

44 Pages Posted: 14 Feb 2018 Last revised: 7 Oct 2019

See all articles by John R. M. Hand

John R. M. Hand

University of North Carolina Kenan-Flagler Business School

Henry Laurion

University of Colorado at Boulder - Department of Accounting

Alastair Lawrence

London Business School

Nicholas Martin

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

Date Written: October 4, 2019

Abstract

Since 2001, the number of financial statement line items forecasted by analysts and managers that I/B/E/S and FactSet capture in their electronic data feeds has soared. Taking advantage of this rich new data, we find that 11 income statement and two cash flow statement analyst and management guidance surprises reliably explain variation in firms’ signed earnings announcement returns. The most important surprises overall are (i) one-quarter-ahead sales guidance surprise, (ii) analyst sales surprise, (iii) analyst Street earnings surprise, and (iv) one-quarter-ahead Street earnings guidance surprise. No balance sheet surprises and no expense surprises are significant. We also find that the adjusted R2s of our multivariate regressions are up to six times those of univariate Street earnings surprise regressions, and that while the univariate coefficient on Street earnings surprise has risen since 2001, the multivariate coefficient has fallen. The latter result points to the inferential benefits of taking into account the full set of surprises, and in particular sales-based surprises, versus relying on Street earnings surprise alone.

Keywords: Signed earnings announcement returns, analyst forecast surprises, management guidance surprises, FactSet, I/B/E/S

JEL Classification: G12, M41

Suggested Citation

Hand, John R. M. and Laurion, Henry and Lawrence, Alastair and Martin, Nicholas, Explaining Firms’ Signed Earnings Announcement Stock Returns Using FactSet and I/B/E/S Data Feeds (October 4, 2019). Available at SSRN: https://ssrn.com/abstract=3117122 or http://dx.doi.org/10.2139/ssrn.3117122

John R. M. Hand (Contact Author)

University of North Carolina Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-3173 (Phone)
919-962-4727 (Fax)

Henry Laurion

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

419 UCB
Boulder, CO 80309-0419
United States

Alastair Lawrence

London Business School ( email )

Regent's Park
London
United Kingdom

HOME PAGE: http://Www.alastairlawrence.net

Nicholas Martin

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
335
Abstract Views
1,471
rank
91,226
PlumX Metrics