DAC Research Seminar - Prof. Garen Markarian - WHU - Otto Beisheim School of Management , Vallendar, D
Information Shocks and Stock Prices
Monday 21 October 2019 (17h30 - 19h00) - Anthropole - 2042
We investigate how investors react to information shocks, i.e. when reported earnings are higher (lower) than the most optimistic (pessimistic) analysts’ forecast. Holding constant their magnitude, information shocks lead to large share price reactions and to ensuing analyst forecast revisions. More importantly, they account for the ensuing post-earnings announcement drift, explain the steepness of the S-shaped earnings-share price relation, the right skew in earnings surprise distributions, and lead to earnings response coefficients that are almost twice as large in magnitude as compared to earnings surprises that fall within the range of forecasts.