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

Forthcoming in Review of Accounting Studies

40 Pages Posted: 14 Feb 2018 Last revised: 23 Mar 2021

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

Cornerstone Research

Date Written: March 23, 2021

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 data feeds has soared. Using this new data, we find that 13 item surprises—11 income statement-based and 2 cash flow statement-based analyst and management guidance surprises—reliably explain firms’ signed earnings announcement returns. No balance sheet or expense surprises are significant. The most important surprises are (i) one-quarter-ahead sales guidance surprise, (ii) analyst sales surprise, (iii) annual Street earnings guidance surprise, and (iv) analyst Street earnings surprise. We also find that the adjusted R2s of our multivariate regressions are three times higher than the adjusted R2s of univariate Street earnings surprise regressions, and that the four most important surprises account for approximately half of this increase in explanatory power.

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

JEL Classification: G12, G17, M41

Suggested Citation

Hand, John R. M. and Laurion, Henry and Lawrence, Alastair and Martin, Nicholas, Explaining Firms’ Earnings Announcement Stock Returns Using FactSet and I/B/E/S Data Feeds (March 23, 2021). Forthcoming in Review of Accounting Studies, 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

Cornerstone Research ( email )

Boston, MA 02115
United States

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