Financial Analysts? Earnings Forecast Dispersion and Intraday Stock Price Variability Around Quarterly Earnings Announcements

28 Pages Posted: 18 Aug 1998

See all articles by Samuel S. Tung

Samuel S. Tung

affiliation not provided to SSRN

Gerald J. Lobo

University of Houston - C.T. Bauer College of Business

Abstract

This study investigates the relationship between the dispersion of analysts? earnings forecasts and stock price variability around quarterly earnings announcements. Consistent with theoretical predictions, the empirical analysis shows that stock price variability at the time of earnings announcements is positively related to the degree of analysts? earnings forecast dispersion. The analysis also demonstrates that stock price variability is significantly greater from two days before to two days after the earnings announcement for firms ranked in the bottom third on the basis of analysts? forecast dispersion, whereas it is significantly greater from eight days prior to five days following the earnings announcement for firms in the top third. These results suggest that there is information about the earnings announcement that becomes available to at least a subset of investors prior to the earnings release. The increased level of price variability for five days following the earnings announcement suggests that market participants take different amounts of time to process the information conveyed by the earnings announcement.

JEL Classification: M41, H29, G12, G14

Suggested Citation

Tung, Samuel S. and Lobo, Gerald J., Financial Analysts? Earnings Forecast Dispersion and Intraday Stock Price Variability Around Quarterly Earnings Announcements. Available at SSRN: https://ssrn.com/abstract=113712 or http://dx.doi.org/10.2139/ssrn.113712

Samuel S. Tung (Contact Author)

affiliation not provided to SSRN

Gerald J. Lobo

University of Houston - C.T. Bauer College of Business ( email )

Houston, TX 77204-6021
United States
713-743-4838 (Phone)
713-743-4828 (Fax)

HOME PAGE: http://www.bauer.uh.edu/acct/acctprofile.asp?search=Gerald%20Lobo

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