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http://bura.brunel.ac.uk/handle/2438/875
Title: | Analyst Underreaction to Past Information About Earnings: reporting, processing or plain old misspecification bias? |
Authors: | Constantina, C Forbes, WP Skerratt, L |
Issue Date: | 2000 |
Publisher: | Brunel University |
Citation: | Economics and Finance Working papers, Brunel University, 00-14 |
Abstract: | We revisit the debate concerning the interpretation given to prior year’s earnings changes in predicting future earnings as discussed by Abarbanell & Bernard (1992), Francis & Philbrick (1993) and Easterwood and Nutt (1999). We advance a new specification of this relationship which distinguishes between earnings reversion and momentum. On a large UK dataset, we find there is substantial underreaction, particularly in situations of earnings momentum, approximately six times as large as that identified by Abarbanell & Bernard. This suggests that analysts behaviour is still a candidate to explain post earnings announcement drift. We also show that our model performs well relative to a specification recently proposed by Easterwood and Nutt (1999). |
URI: | http://bura.brunel.ac.uk/handle/2438/875 |
Appears in Collections: | Dept of Economics and Finance Research Papers |
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