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Earnings Announcements, Analyst Forecasts, and Trading Volume

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Authors

Song, Minsup

Issue Date
2013-12
Publisher
College of Business Administration (경영대학)
Citation
Seoul Journal of Business, Vol.19 No.2, pp. 1-44
Keywords
earnings announcementanalyst forecastforecast timingstock price reactiontrading volume
Abstract
Empirical evidence shows that a significant proportion of analysts

issue their forecasts at the time of an earnings announcement (Ivković

and Jegadeesh 2004). These forecasts are commonly regarded as analyst

interpretations of earnings news contained in the announcement (Schipper

1991). Although analytical studies suggest that market reaction to news

from earnings announcement could be affected by analysts interpretation

information (Kim and Verrecchia 1994, 1997), the vast majority of previous

research has ignored whether and how these analysts interpreting forecasts

affect the market reaction to the earnings announcements. Our empirical

results show that sensitivity of trading volume reaction to earnings

announcements is increasing in the number of announcement period

analyst forecasts. The sensitivity of trading volume reaction is greater

when there is small analyst forecast dispersion. We also find that stock

return sensitivity is also increasing with the number of analyst forecasts. In

general, our results suggests that analysts interpretation help disseminate

new information contained in earnings announcement to the market.
ISSN
1226-9816
Language
English
URI
https://hdl.handle.net/10371/91413
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College of Business Administration/Business School (경영대학/대학원)Dept. of Business Administration (경영학과)Seoul Journal of Business (SJB)Seoul Journal of Business Volume 19, Number 1/2 (2013)
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