Behavioral Finance aims to explain empirical anomalies by introducing investor psychology as a determinant of asset pricing. This study provides strong evidence that anomalous stock price behavior following earnings announcements is due to a representativeness bias. It investigates current and past earnings surprises and subsequent market reaction for listed US companies over the period 1983-19...

This study shows that the recent trajectory of a firm’s profits predicts future profitability and stock returns. The predictive information contained in the trend of profitability is not subsumed by the level of profitability, earnings momentum, or other well-known determinants of stock returns. The profit trend also predicts the earnings surprise one quarter later, and analyst forecast errors ...

We develop a stock return-predictive measure based on an efficient aggregation of the portfolio holdings of all actively managed U.S. domestic equity mutual funds, and use this model to study the source of fund managers’ stock-selection abilities. This “generalized-inverse alpha” (GIA) approach reveals differences in the ability of managers to predict firms’ future earnings from fundamental res...

This paper provides evidence that analysts who made a sequence of accurate predictions of earnings relative to the median forecast tend to be relatively more inaccurate and more out of consensus in their subsequent earnings prediction. This phenomenon is economically and statistically meaningful. The results are robust to different estimation techniques and different control variables. Our find...

This paper uses high frequency data to evaluate whether information asymmetry in the market is reduced as a result of corporate earnings and dividend announcements. Changes in the level of information asymmetry due to the announcements are proxied by the rate of change in trading volume, bid-ask spread, cumulative abnormal returns, and order imbalance. Our results show support for an informatio...

This paper is about income and poverty dynamics and their socioeconomic correlates. The first half of the paper aims to establish some of the salient facts for Britain, applying the pioneering methods of Bane and Ellwood (1986). Important for poverty dynamics are changes in labour earnings from persons other than the household head, changes in non-labour income (including benefits), and changes...

This paper investigates the role of management earnings forecasts in mitigating information asymmetry between investors and managers relating to moral hazard, and explains how earnings guidance can facilitate monitoring. I demonstrate that firms that are more susceptible to moral hazard problems and more difficult to monitor are also more likely to issue annual earnings forecasts and they do so...

Received: 15 July 2008 Revised: 8 January 2010 Accepted: 12 February 2010 Online publication date: 24 June 2010 Abstract The international business (IB) literature has widely recognized political forces as major factors that complicate the strategic decisions of multinational enterprises (MNEs). Analyses by financial intermediaries can help to reduce the risk of information asymmetry caused by ...