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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27278
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| Title: | Naive Investors, Earnings Announcements, and Stock Price Movements |
| Authors: | Mendenhall, Richard R. |
| Issue Date: | Jan-1995 |
| Series/Report no.: | FIN-94-047 |
| Abstract: | This paper addresses the issue of whether investors with
“naïve” earnings expectations (i.e., earnings forecasts
that are systematically less accurate than other publicly available
predictions) have sufficient market power to affect common stock prices.
The results clearly indicate that when security analysts predict
quarterly earnings increases (decreases), from the same fiscal quarter
of the prior year, that the abnormal return around the upcoming earnings
announcement tends to be positive. When the data are formed into 50
portfolios, about 66% of the abnormal return variation around earnings
announcements is explained by the predicted earnings change. This is
surprising since the forecasts used are dated from one to thirteen weeks
before the earnings announcement. |
| URI: | http://hdl.handle.net/2451/27278 |
| Appears in Collections: | Finance Working Papers
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