Robust measures of earnings surprises

Event studies of market efficiency measure an earnings surprise with the consensuserror (CE), defined as earnings minus the average of professional forecasts. Even if asubset of forecasts can be biased, the ideal but difficult to estimate parameter-dependentalternative to CE is a nonlinear filter of...

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Main Authors: CHIANG, Chin-Han, DAI, Wei, FAN, Jianqing, HONG, Harrison, Jun TU
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Language:English
Published: Institutional Knowledge at Singapore Management University 2019
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Online Access:https://ink.library.smu.edu.sg/lkcsb_research/5406
https://ink.library.smu.edu.sg/context/lkcsb_research/article/6405/viewcontent/SSRN_id2473366.pdf
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spelling sg-smu-ink.lkcsb_research-64052019-05-06T00:58:41Z Robust measures of earnings surprises CHIANG, Chin-Han DAI, Wei FAN, Jianqing HONG, Harrison Jun TU, Event studies of market efficiency measure an earnings surprise with the consensuserror (CE), defined as earnings minus the average of professional forecasts. Even if asubset of forecasts can be biased, the ideal but difficult to estimate parameter-dependentalternative to CE is a nonlinear filter of individual errors that adjusts for bias. We showthat CE is a poor parameter-free approximation for this ideal measure. The fractionof misses on the same side (FOM), by discarding the magnitude of misses, offers a farbetterapproximation. FOM performs particularly well against CE in predicting thereturns of US stocks, where bias is potentially large, than that of international stocks. 2019-04-01T07:00:00Z text application/pdf https://ink.library.smu.edu.sg/lkcsb_research/5406 info:doi/10.1111/jofi.12746 https://ink.library.smu.edu.sg/context/lkcsb_research/article/6405/viewcontent/SSRN_id2473366.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University Financial analysts stock recommendations fraction of missess Finance Finance and Financial Management
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic Financial analysts
stock recommendations
fraction of missess
Finance
Finance and Financial Management
spellingShingle Financial analysts
stock recommendations
fraction of missess
Finance
Finance and Financial Management
CHIANG, Chin-Han
DAI, Wei
FAN, Jianqing
HONG, Harrison
Jun TU,
Robust measures of earnings surprises
description Event studies of market efficiency measure an earnings surprise with the consensuserror (CE), defined as earnings minus the average of professional forecasts. Even if asubset of forecasts can be biased, the ideal but difficult to estimate parameter-dependentalternative to CE is a nonlinear filter of individual errors that adjusts for bias. We showthat CE is a poor parameter-free approximation for this ideal measure. The fractionof misses on the same side (FOM), by discarding the magnitude of misses, offers a farbetterapproximation. FOM performs particularly well against CE in predicting thereturns of US stocks, where bias is potentially large, than that of international stocks.
format text
author CHIANG, Chin-Han
DAI, Wei
FAN, Jianqing
HONG, Harrison
Jun TU,
author_facet CHIANG, Chin-Han
DAI, Wei
FAN, Jianqing
HONG, Harrison
Jun TU,
author_sort CHIANG, Chin-Han
title Robust measures of earnings surprises
title_short Robust measures of earnings surprises
title_full Robust measures of earnings surprises
title_fullStr Robust measures of earnings surprises
title_full_unstemmed Robust measures of earnings surprises
title_sort robust measures of earnings surprises
publisher Institutional Knowledge at Singapore Management University
publishDate 2019
url https://ink.library.smu.edu.sg/lkcsb_research/5406
https://ink.library.smu.edu.sg/context/lkcsb_research/article/6405/viewcontent/SSRN_id2473366.pdf
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