TY - JOUR
T1 - The Interpretation of Unanticipated News Arrival and Analysts' Skill
AU - Rubin, Amir
AU - Segal, Benjamin
AU - Segal, Dan
N1 - Publisher Copyright:
© 2017 Michael G. Foster School of Business, University of Washington.
PY - 2017/8/1
Y1 - 2017/8/1
N2 - Analysts' functions are divided into discovery and interpretation roles, but distinguishing between the two is nontrivial. We conjecture that analysts' interpretation skill can be gauged by their forecast revisions following material unanticipated news, in particular, following nonearnings 8-K reports, which arrive at the market unexpectedly. We establish that unanticipated 8-Ks are informative for analysts and find that analysts who are more likely to revise their forecasts following unanticipated 8-Ks provide more timely and accurate forecasts. We document a positive association between analysts' tendency to react to unanticipated 8-Ks and market reaction to their recommendation changes, suggesting investors prefer these analysts' opinions.
AB - Analysts' functions are divided into discovery and interpretation roles, but distinguishing between the two is nontrivial. We conjecture that analysts' interpretation skill can be gauged by their forecast revisions following material unanticipated news, in particular, following nonearnings 8-K reports, which arrive at the market unexpectedly. We establish that unanticipated 8-Ks are informative for analysts and find that analysts who are more likely to revise their forecasts following unanticipated 8-Ks provide more timely and accurate forecasts. We document a positive association between analysts' tendency to react to unanticipated 8-Ks and market reaction to their recommendation changes, suggesting investors prefer these analysts' opinions.
UR - http://www.scopus.com/inward/record.url?scp=85028324439&partnerID=8YFLogxK
U2 - 10.1017/S0022109017000539
DO - 10.1017/S0022109017000539
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AN - SCOPUS:85028324439
SN - 0022-1090
VL - 52
SP - 1491
EP - 1518
JO - Journal of Financial and Quantitative Analysis
JF - Journal of Financial and Quantitative Analysis
IS - 4
ER -