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Management Guidance, Earnings Momentum and Price Momentum
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This paper shows that management earnings guidance can reduce earnings momentum based on seasonal earnings changes (EC) and price momentum but cannot reduce earnings momentum based on earnings surprise (ES, calculated with analyst forecast consensus). Further evidence suggests that the magnitude of bias in management earnings guidance regarding to seasonal earnings changes (EC), earnings surprises (ES) and prior return is associated with the reduction of the according momentum. Finally, the evidence of market reaction shows that investors immediately further incorporate prior information when the management earnings guidance is announced. In sum, management earnings guidance can accelerate the incorporation of public information and the extent of the acceleration is associated with the bias in the management earnings guidance.
Title: Management Guidance, Earnings Momentum and Price Momentum
Description:
This paper shows that management earnings guidance can reduce earnings momentum based on seasonal earnings changes (EC) and price momentum but cannot reduce earnings momentum based on earnings surprise (ES, calculated with analyst forecast consensus).
Further evidence suggests that the magnitude of bias in management earnings guidance regarding to seasonal earnings changes (EC), earnings surprises (ES) and prior return is associated with the reduction of the according momentum.
Finally, the evidence of market reaction shows that investors immediately further incorporate prior information when the management earnings guidance is announced.
In sum, management earnings guidance can accelerate the incorporation of public information and the extent of the acceleration is associated with the bias in the management earnings guidance.
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