The Information in UK Company Profit Warnings
6 Pages Posted: 26 Jul 2005
This article examines the information content of trading statements issued by UK companies between 1994 and 2000. These statements are released by companies quoted on the London Stock Exchange when they have information that is relevant to their share price. The article concludes that trading statements indicating that earnings will be lower than expected by the market-so-called 'profit warnings' - are particularly informative, as shown by the impact of trading statements on their associated stock prices. There is also preliminary evidence to suggest that the incidence of profit warnings may be a useful leading indicator of UK economic activity.
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By Nick Collett