Overreaction to Intra‐industry Information Transfers?

Jacob Thomas and Frank Zhang

Journal of Accounting Research, 2008, vol. 46, issue 4, 909-940

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 related to 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.

Date: 2008
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Journal of Accounting Research is currently edited by Philip G. Berger, Luzi Hail, Christian Leuz, Haresh Sapra, Douglas J. Skinner, Rodrigo Verdi and Regina Wittenberg Moerman

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