Overreaction to Intra-Industry Information Transfers?
50 Pages Posted: 7 Dec 2006 Last revised: 12 Nov 2007
There are 2 versions of this paper
Overreaction to Intra-Industry Information Transfers?
Overreaction to Intra-Industry Information Transfers?
Date Written: November 5, 2007
Abstract
Prior research has documented that earnings announcements provide information not only about the announcing firm but also about other firms in the same industry. We document a stock market anomaly associated with this phenomenon of intra-industry information transfers by showing that the stock price movements of late announcers in response to earnings reported by early announcers are negatively correlated with the subsequent price responses of late announcers to their own earnings reports. Apparently, the stock market overestimates the intra-industry implications of early announcers' earnings for late announcers' earnings, and that overestimation is corrected when late announcers disclose their earnings.
Keywords: Intra-industry information transfer, market efficiency, stock returns, earnings surprises
JEL Classification: G12, G14, M41
Suggested Citation: Suggested Citation
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