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Analyst Estimate Revision Clusters and Corporate Events, Parts I and Ii

41 Pages Posted: 8 Jun 2004  

Mark Bagnoli

Purdue University

Stanley Levine

QED International Associates, Inc.

Susan G. Watts

Purdue University

Date Written: February 2005

Abstract

Abstract, Part I: This paper uses periods of unusually heavy earnings estimate revision activity by analysts to assess the relative usefulness of corporate information events (CIEs) in firm valuation. Because accounting information is more readily available, newsworthy and accessible, we hypothesize CIEs that focus on financial statement information trigger greater analyst revision activity over a shorter period of time than CIEs that offer strategic or "soft" information. Our results are consistent with this hypothesis. In Part II, we examine investor response to revision clusters that accompany various CIEs.

Abstract, Part II: In Part I of this study, we evaluate the relative usefulness of information in alternative corporate information events (CIEs) to analysts by examining the frequency with which they trigger clusters of analysts' earnings estimate revisions. In Part II, we examine investor response to various CIEs and their revision clusters. We find that stock prices react most strongly and adjust most quickly to revision clusters that accompany CIEs that focus on financial statement information. CIEs that offer strategic information take longer for analysts and investors to assimilate, and investors appear to rely heavily on later analyst revisions following such events.

Keywords: disclosures, strategic information, market efficiency, analyst forecasts, analyst, forecast, earnings forecast, earnings announcements, valuation, home bias, visibility

JEL Classification: G12, G14, G29, M41

Suggested Citation

Bagnoli, Mark and Levine, Stanley and Watts, Susan G., Analyst Estimate Revision Clusters and Corporate Events, Parts I and Ii (February 2005). Available at SSRN: https://ssrn.com/abstract=555701 or http://dx.doi.org/10.2139/ssrn.555701

Mark Bagnoli

Purdue University ( email )

Department of Accounting
West Lafayette, IN 47907-1310
United States
765-494-4484 (Phone)
765-496-1778 (Fax)

Stanley Levine

QED International Associates, Inc. ( email )

300 Central Park West
#3D2
New York, NY 10024
United States
212-580-5325 (Phone)

Susan Watts (Contact Author)

Purdue University ( email )

Department of Accounting
West Lafayette, IN 47907-1310
United States
765-494-4504 (Phone)
765-496-1778 (Fax)

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