SHERP

Changes in Order Backlog and Future Returns

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Authors
Baik, Bok; Ahn, Taesik
Issue Date
2007
Publisher
College of Business Administration (경영대학)
Citation
Seoul Journal of Business Vol13(2): 105~126(2007)
Keywords
order backlog; non-GAAP indicator; analyst optimism
Abstract
This paper examines whether investors recognize the implications of
changes in order backlog, a non-GAAP leading indicator, for future
performance. A hedge portfolio strategy taking a long position in the
highest decile of order backlog change and a short position in the lowest
decile of order backlog change earns 13.7 percent in the year after the
hedge portfolio is formed. Moreover, analysts’ forecast errors are large
and negative (overoptimistic) for firms experiencing declines in order
backlog. Overall, our evidence indicates that analysts underreact to the
information in changes in order backlog. In addition, the market does
not appear to see through the relation between changes in order backlog
and future performance and underweights the implications of order
backlog, which contrasts with the findings of Rajgopal, Shevlin, and Venkatachalam (2003).
ISSN
1226-9816
Language
English
URI
http://hdl.handle.net/10371/1814
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College of Business Administration/Business School (경영대학/대학원)Dept. of Business Administration (경영학과)Seoul Journal of BusinessSeoul Journal of Business Volume 13, Number 1/2 (2007)
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