Normal view MARC view

Soft information in earnings announcements: news or noise?

Author: Demers, Elizabeth ; Vega, ClaraINSEAD Area: Accounting and Control ; Finance Series: Working Paper ; 2008/44/AC/FIN Publisher: Fontainebleau : INSEAD, 2008.Language: EnglishDescription: 54 p.Type of document: INSEAD Working Paper Online Access: Click here Abstract: This paper examines whether the “soft” information contained in the text of management’s quarterly earnings press releases is incrementally informative over the company’s reported "hard" earnings news. We use Diction, a textual-analysis program, to extract various dimensions of managerial net optimism from more than 20,000 corporate earnings announcements over the period 1998 to 2006, and document that unanticipated net optimism in managers’ language affects announcement period abnormal returns and predicts post-earnings announcement drift. We find that the market response varies by firm size, turnover, media and analyst coverage, and the extent to which the standard accounting model captures the underlying economics of the firm. We also show that the second moment of soft information, the level of certainty in the text, is an important determinant of contemporaneous idiosyncratic volatility, and it predicts future idiosyncratic volatility. Next title: Soft information in earnings announcements: news or noise? (RV of 2008/44/AC/FIN) - Demers, Elizabeth;Vega, Clara - 2010 - INSEAD Working Paper
Tags: No tags from this library for this title. Log in to add tags.
Item type Current location Collection Call number Status Date due Barcode Item holds
INSEAD Working Paper Digital Library
PDF Available BC008376
Total holds: 0

This paper examines whether the “soft” information contained in the text of management’s quarterly earnings press releases is incrementally informative over the company’s reported "hard" earnings news. We use Diction, a textual-analysis program, to extract various dimensions of managerial net optimism from more than 20,000 corporate earnings announcements over the period 1998 to 2006, and document that unanticipated net optimism in managers’ language affects announcement period abnormal returns and predicts post-earnings announcement
drift. We find that the market response varies by firm size, turnover, media and analyst coverage, and the extent to which the standard accounting model captures the underlying economics of the firm. We also show that the second moment of soft information, the level of certainty in the text, is an important determinant of contemporaneous idiosyncratic volatility, and it predicts future idiosyncratic volatility.

Digitized

There are no comments for this item.

Log in to your account to post a comment.
Koha 18.11 - INSEAD Catalogue
Home | Contact Us | What's Koha?