Search engine for discovering works of Art, research articles, and books related to Art and Culture
Javascript must be enabled to continue!
Crowdsourced Forecasts and the Market Reaction to Earnings Announcement News
View through CrossRef
ABSTRACT
This study examines whether crowdsourced forecasts of earnings and revenues help investors unravel bias in earnings announcement news, which is commonly derived from analyst forecasts. Our results suggest that investors, on average, understand and price the predictive signals reflected in crowdsourced forecasts about the bias in analyst-based earnings and revenue surprises. Using the staggered addition of firms to the Estimize platform, we find that crowdsourced coverage is associated with reductions in the mispricing of forecast bias and declines in earnings announcement premia. We further find some evidence that managers use income-increasing accruals to meet the crowdsourced forecast benchmark and that they respond to crowdsourced coverage through increased downward earnings and revenue guidance. Overall, we conclude that user-generated content on crowdsourced financial information platforms helps investors discount biases in traditional equity research and thereby better process the news in earnings announcements.
JEL Classifications: G14; G20; M41.
Title: Crowdsourced Forecasts and the Market Reaction to Earnings Announcement News
Description:
ABSTRACT
This study examines whether crowdsourced forecasts of earnings and revenues help investors unravel bias in earnings announcement news, which is commonly derived from analyst forecasts.
Our results suggest that investors, on average, understand and price the predictive signals reflected in crowdsourced forecasts about the bias in analyst-based earnings and revenue surprises.
Using the staggered addition of firms to the Estimize platform, we find that crowdsourced coverage is associated with reductions in the mispricing of forecast bias and declines in earnings announcement premia.
We further find some evidence that managers use income-increasing accruals to meet the crowdsourced forecast benchmark and that they respond to crowdsourced coverage through increased downward earnings and revenue guidance.
Overall, we conclude that user-generated content on crowdsourced financial information platforms helps investors discount biases in traditional equity research and thereby better process the news in earnings announcements.
JEL Classifications: G14; G20; M41.
Related Results
News event
News event
When analyzing news media data with automated content analysis techniques, studies often aggregate their measures at the article level (Nicholls & Bright, 2019). However, many ...
Aggregate market attention around earnings announcements
Aggregate market attention around earnings announcements
PurposeThis analysis is the first to explore the overall roles of the offsetting attraction and distraction influences of earnings news in shaping the level of attention given to t...
Isolation, characterization and semi-synthesis of natural products dimeric amide alkaloids
Isolation, characterization and semi-synthesis of natural products dimeric amide alkaloids
Isolation, characterization of natural products dimeric amide alkaloids from roots of the Piper chaba Hunter. The synthesis of these products using intermolecular [4+2] cycloaddit...
Earnings Management to Avoid Earnings Decreases and Losses: Empirical Evidence from Japan
Earnings Management to Avoid Earnings Decreases and Losses: Empirical Evidence from Japan
The main purpose of this study is to investigate whether and how Japanese firms manage reported earnings. We first investigate whether Japanese firm managers engage in earnings man...
Pre-Earnings Announcement Drift
Pre-Earnings Announcement Drift
We present evidence of a predictable drift in stock prices before the earnings announcements of firms that announce their earnings later than other firms in their industry. We for...
Types of Media Outlets (Formats and Genre)
Types of Media Outlets (Formats and Genre)
“Types of media outlets”, often referred to as “media type” or “medium type”, is a variable that is widely used for content analyses of news media. The variable indicates which med...
The Dynamics of Earnings Forecast Management
The Dynamics of Earnings Forecast Management
This paper investigates whether firms manage analyst forecasts to generate positive earnings surprises and the consequences of such forecast management. We first document that firm...
Earnings Non-Synchronicity and Voluntary Disclosure
Earnings Non-Synchronicity and Voluntary Disclosure
Earnings non-synchronicity reflects the extent to which firm-specific factors determine a firm’s earnings. Prior research suggests that high earnings non-synchronicity impedes corp...