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This study examines the influence of analysts on the timing of returns associated with firms’ earnings news, and the implications for returns prediction. This is important for determining the lapse between the time when pieces of earnings news are available, when such news are incorporated in prices, and the implications for a returns trading strategy based on earnings prediction. The results show that depending on the level of analysts’ forecasting activities for a firm, there is a significant variation in the timing of the returns associated with the firm’s total, industry-wide and firm-specific components of earnings news. For firms that are subject to high (low and none) analysts’ forecasting activities, the returns in a given period tend to be more associated with the contemporaneous and future (lagged and contemporaneous) earnings news. A returns trading strategy based on earnings prediction, would want to impound earnings information from the analysts’ forecasts of the firms with more analysts’ forecasting activities into the earnings forecasts of firms with less forecasting activities.

Publication Title

Journal of Finance and Accountancy

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Accounting Commons



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