The Relative Information Content of Guidance and Earnings

Milian, Jonathan A.

doi:10.2139/ssrn.1274103

Cited by 9 publications

(4 citation statements)

References 38 publications

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“…For the other two return windows, the market return association with guidance surprise is more than twice as large as the return association with earnings surprise. Consistent with recent firm‐level evidence (Ball and Shivakumar [], Beyer et al [], Milian []), guidance surprise appears to convey more information to broader equity prices than earnings surprise.…”

Section: Management Forecast Timelinesssupporting

confidence: 84%

What Do Management Earnings Forecasts Convey About the Macroeconomy?

Bonsall

Bozanic

Fischer

2013

J of Accounting Research

143

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We decompose quantitative management earnings forecasts into macroeconomic and firm-specific components to determine the extent to which voluntary disclosure provided by management has macroeconomic information content. We provide evidence that the forecasts of bellwether firms, which are defined as firms in which macroeconomic news explains the greatest amount of variation in the forecasts, provide timely information to the market about the macroeconomy when bundled with earnings announcements. Further, we show that bellwether firms provide timely information about both industryspecific events and broader economic events. Finally, we document that the macroeconomic news in individual forecasts is more pronounced for bad news and point forecasts. Electronic copy available at: http://ssrn.com/abstract=1980195Electronic copy available at: http://ssrn.com/abstract=1980195 What Do Management Earnings Forecasts Convey About the Macroeconomy? AbstractWe decompose quantitative management earnings forecasts into macroeconomic and firm-specific components to determine the extent to which voluntary disclosure provided by management has macroeconomic information content. We provide evidence that the forecasts of bellwether firms, which are defined as firms in which macroeconomic news explains the greatest amount of variation in the forecasts, provide timely information to the market about the macroeconomy when bundled with earnings announcements. Further, we show that bellwether firms provide timely information about both industry-specific events and broader economic events. Finally, we document that the macroeconomic news in individual forecasts is more pronounced for bad news and point forecasts.

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Section: Management Forecast Timelinesssupporting

confidence: 84%

What Do Management Earnings Forecasts Convey About the Macroeconomy?

Bonsall

Bozanic

Fischer

2013

J of Accounting Research

143

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“…These findings are consistent with the notion that analysts anticipate a certain degree of positive serial correlation in MFEs and adjust their reaction to current management forecasts accordingly. 32 32 Prior studies suggest differential information contents for bundled management forecasts (i.e., forecasts issued with earnings announcements) and stand-alone management forecasts (e.g., Atiase et al [2005], Milian [2010]). We thus reestimate equation (5) across bundled and stand-alone management forecasts, respectively.…”

Section: Management Earnings Forecast Errors?mentioning

confidence: 99%

“…32 32 Prior studies suggest differential information contents for bundled management forecasts (i.e., forecasts issued with earnings announcements) and stand‐alone management forecasts (e.g., Atiase et al [2005], Milian [2010]). We thus reestimate across bundled and stand‐alone management forecasts, respectively.…”

mentioning

confidence: 99%

Serial Correlation in Management Earnings Forecast Errors

Gong

Wang

2011

Journal of Accounting Research

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We examine whether management earnings forecast errors exhibit serial correlation and how analysts understand the serial correlation property of management forecast errors (MFEs). MFEs should not exhibit serial correlation if managers efficiently process information in prior forecast errors and truthfully convey their earnings expectations through management forecasts. However, for long‐horizon management forecasts of annual earnings, we find significantly positive serial correlation in MFEs, and sample self‐selection does not seem to drive this phenomenon. Further analyses suggest that managers’ unintentional information processing bias contributes to this positive serial correlation. Analysts anticipate the intertemporal persistence of MFEs but underestimate the persistence level when reacting to management forecasts. Our findings have implications for market participants who rely on management forecasts to form earnings expectations, and also shed light on the efficiency of managerial decision making.

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“…Representative studies includeBall and Brown (1968), Shivakumar (2008), Foster (1973),Patell (1976),Penman (1980),Ajinkya and Gift (1984),Waymire (1984),Baginski et al (1993),Skinner (1994), Miller (2002,Hutton et al(2003),Milian (2010),Griffin (2003), Li and Ramesh (2009), Lerman and Livnat (2009),Bryan (1997), andBrown and Tucker (2011). 2 Implied volatility is the market's expectation of the average stock return volatility over the duration of the option contract and is equal to the volatility implied by the option's price and an option pricing model such as the Black-Scholes model or the Cox-Ross-Rubinstein binomial tree model.…”

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confidence: 99%

An Empirical Examination of Horizon: Evidence from the Term Structure of Implied Equity Volatilities

Milian

2014

SSRN Journal

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We develop and test measures of the horizon of firm uncertainty and of the horizon of managers' corporate disclosures. The measures exploit information in the term structure of implied equity volatilities to gauge the relative extent to which the information underlying securities prices reflects long-term versus short-term uncertainty. We find that the horizon of firm uncertainty measure is associated with variables that are likely to capture the extent to which firms' business models result in differing degrees of uncertainty about the long-term versus the short-term. The horizon of managers' corporate disclosures measure allows us to characterize managers' disclosures in terms of whether they provide information about long-term business strategies or are more oriented towards short-term operating results. We find that earnings announcements containing management forecasts have shorter disclosure horizons than earnings announcements not containing management forecasts.

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The Relative Information Content of Guidance and Earnings

Cited by 9 publications

References 38 publications

What Do Management Earnings Forecasts Convey About the Macroeconomy?

What Do Management Earnings Forecasts Convey About the Macroeconomy?

Serial Correlation in Management Earnings Forecast Errors

An Empirical Examination of Horizon: Evidence from the Term Structure of Implied Equity Volatilities

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