THESIS
2015
ix leaves, 47 pages : illustrations ; 30 cm
Abstract
This thesis documents the systematic skipping of earning forecast by security analysts
and investigates the relationship between the absence of news and the performance of
related firms. We find that these skipping are associated with negative information about
the stocks, and are not immediately recognized by the market. A long-short trading
strategy that utilizes forecast skipping generates significant abnormal return. We argue
that when facing negative information about the covered firm, some analysts choose to
keep silent instead of lower their forecast. We also provide an alternative way to capture
the effect of analysts' silence. The average factor-adjusted return of firms in the longest
silent time quintile is significantly lower than that of firms in other quintile. And...[
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This thesis documents the systematic skipping of earning forecast by security analysts
and investigates the relationship between the absence of news and the performance of
related firms. We find that these skipping are associated with negative information about
the stocks, and are not immediately recognized by the market. A long-short trading
strategy that utilizes forecast skipping generates significant abnormal return. We argue
that when facing negative information about the covered firm, some analysts choose to
keep silent instead of lower their forecast. We also provide an alternative way to capture
the effect of analysts' silence. The average factor-adjusted return of firms in the longest
silent time quintile is significantly lower than that of firms in other quintile. And this
effect is stronger in the months when analysts issue earnings forecasts more frequently.
These results also provide some insights for investors when analyzing security analysts'
earnings forecasts.
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