Analysts' recommendation revisions and subsequent earnings surprises : pre- and post-regulation FD
Palmon, Dan
Analysts' recommendation revisions and subsequent earnings surprises : pre- and post-regulation FD by Dan Palmon and Ari Yezegel - Journal of Accounting, Auditing and Finance Volume 26, number 3, .
This study examines the extent to which analyst recommendations were useful in identifying earnings surprises during the pre- and post-Regulation Fair Disclosure (FD) periods. A comparative analysis of the association between recommendation revisions and subsequent earnings surprises suggests a significant decline in the predictive value of analysts’ recommendations after Regulation FD took effect. Recommendation revisions are roughly 55% less useful in predicting earnings surprises in the post-Regulation FD period. Furthermore, the average abnormal return earned by investors following analysts’ advice to exploit earnings surprises is approximately 70% lower in the post-Regulation FD period. Overall, this article’s findings are consistent with Regulation FD having considerably reduced analysts’ comparative advantage in identifying earnings surprises.
Portfolio analysis
Earnings surprises
Regulation FD
Analysts' recommendation revisions and subsequent earnings surprises : pre- and post-regulation FD by Dan Palmon and Ari Yezegel - Journal of Accounting, Auditing and Finance Volume 26, number 3, .
This study examines the extent to which analyst recommendations were useful in identifying earnings surprises during the pre- and post-Regulation Fair Disclosure (FD) periods. A comparative analysis of the association between recommendation revisions and subsequent earnings surprises suggests a significant decline in the predictive value of analysts’ recommendations after Regulation FD took effect. Recommendation revisions are roughly 55% less useful in predicting earnings surprises in the post-Regulation FD period. Furthermore, the average abnormal return earned by investors following analysts’ advice to exploit earnings surprises is approximately 70% lower in the post-Regulation FD period. Overall, this article’s findings are consistent with Regulation FD having considerably reduced analysts’ comparative advantage in identifying earnings surprises.
Portfolio analysis
Earnings surprises
Regulation FD