Explaining firms’ earnings announcement stock returns using FactSet and I/B/E/S data feeds

Hand, J, Laurion, H, Lawrence, A and Martin, N (2021) Explaining firms’ earnings announcement stock returns using FactSet and I/B/E/S data feeds. Review of Accounting Studies. ISSN 1380-6653 (In Press) OPEN ACCESS


Since 2001, the number of financial statement line items forecasted by analysts and managers that I/B/E/S and FactSet capture in their data feeds has soared. Using this new data, we find that 13 item surprises—11 income statement-based and 2 cash flow statement-based analyst and management guidance surprises—reliably explain firms’ signed earnings announcement returns. No balance sheet or expense surprises are significant. The most important surprises are (i) one-quarter-ahead sales guidance surprise, (ii) analyst sales surprise, (iii) annual Street earnings guidance surprise, and (iv) analyst Street earnings surprise. We also find that the adjusted R2s of our multivariate regressions are three times higher than the adjusted R2s of univariate Street earnings surprise regressions, and that the four most important surprises account for approximately half of this increase in explanatory power.

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Item Type: Article
Subject Areas: Accounting
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© 2021 Springer Nature. This is a post-peer-review, pre-copyedit version of an article published in Review of Accounting Studies. The final authenticated version is available online at: https://doi.org/[awaiting publisher's confirmed DOI]

Date Deposited: 25 Jun 2021 13:20
Date of first compliant deposit: 30 Jun 2021
Last Modified: 24 Mar 2024 01:43
URI: https://lbsresearch.london.edu/id/eprint/1734

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