Publication Type
Journal Article
Version
submittedVersion
Publication Date
4-2019
Abstract
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.
Keywords
Financial analysts, stock recommendations, fraction of missess
Discipline
Finance | Finance and Financial Management
Research Areas
Finance
Publication
Journal of Finance
Volume
74
Issue
2
First Page
943
Last Page
983
ISSN
0022-1082
Identifier
10.1111/jofi.12746
Publisher
Wiley: No OnlineOpen
Citation
CHIANG, Chin-Han; DAI, Wei; FAN, Jianqing; HONG, Harrison; and Jun TU.
Robust measures of earnings surprises. (2019). Journal of Finance. 74, (2), 943-983.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/5406
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1111/jofi.12746