Earnings Surprises, Growth Expectations, and Stock Returns or Don't Let an Earnings Torpedo Sink Your Portfolio

Douglas J. Skinner () and Richard G. Sloan

Review of Accounting Studies, 2002, vol. 7, issue 2, No 12, 289-312

Abstract: Abstract We provide new evidence that the inferior returns to growth stocks relative to value stocks are the result of expectational errors about future earnings performance. Our evidence demonstrates that growth stocks exhibit an asymmetric response to earnings surprises. We show that while growth stocks are at least as likely to announce negative earnings surprises as positive earnings surprises, they exhibit an asymmetrically large negative price response to negative earnings surprises. After controlling for this asymmetric price response, we find no remaining evidence of a return differential between growth and value stocks. We conclude that the inferior return to growth stocks is attributable to overoptimistic expectational errors that are corrected through subsequent negative earnings surprises.

Keywords: earnings surprises; earnings torpedoes; value; growth; glamour (search for similar items in EconPapers)
Date: 2002
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1023/A:1020294523516 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:reaccs:v:7:y:2002:i:2:d:10.1023_a:1020294523516

Ordering information: This journal article can be ordered from
http://www.springer.com/accounting/journal/11142

DOI: 10.1023/A:1020294523516

Access Statistics for this article

Review of Accounting Studies is currently edited by Paul Fischer

More articles in Review of Accounting Studies from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().