The Post Forecast Revision Drift and Underreaction to Industry-Wide and/or Firm-Specific Earnings
نویسندگان
چکیده
We examine whether the post forecast revision drift is attributable to investors’ underreaction to industry-wide and/or firm-specific earnings news in analysts’ forecast revisions. We find a large drift associated with industry-wide earnings news but, on average, no drift associated with firm-specific earnings news. Consistent with the functional fixation hypothesis, we show empirically that the drift associated with industry-wide earnings news is driven by investors’ underreaction to the greater persistence of industry-wide earnings news. We also find that the magnitude of the drift associated with firm-specific earnings news varies with insider trading intensity, consistent with the information availability hypothesis. * We thank valuable comments from Dan Dhaliwal, Gilles Hilary, Bin Ke, Yong Yu, Guochang Zhang, and workshop participants at the Chinese University of Hong Kong, Hong Kong University of Science and Technology, INSEAD, McMaster University, and Nanyang Technology University of Singapore.
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