Tips and Tells from Managers: How Analysts and the Market Read between the Lines of Conference Calls

Marina Druz, Alexander Wagner and Richard Zeckhauser
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Marina Druz: Swiss Finance Institute

Working Paper Series from Harvard University, John F. Kennedy School of Government

Abstract: Stock prices react significantly to the tone (negativity of words) managers use on earnings conference calls. This reaction reflects reasonably rational use of information. "Tone surprise"--the residual when negativity in managerial tone is regressed on the firm's recent economic performance and CEO fixed effects--predicts future earnings and analyst uncertainty. Prices move more, as hypothesized, in firms where tone surprise predicts more strongly. Experienced analysts respond appropriately in revising their forecasts; inexperienced analysts overreact (underreact) to tone surprises in presentations (answers). Post-call price drift, like post-earnings announcement drift, suggests less-than-full-use of information embedded in managerial tone.

Date: 2015-02
New Economics Papers: this item is included in nep-bec
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Citations: View citations in EconPapers (5)

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Working Paper: Tips and Tells from Managers: How Analysts and the Market Read Between the Lines of Conference Calls (2015)
Working Paper: Tips and Tells from Managers: How Analysts and the Market Read Between the Lines of Conference Calls (2015)
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