The Effect of Ex Ante Management Forecast Accuracy on the Post-Earnings-Announcement Drift
The Accounting Review · 2012 · Volume 87 · Issue 5
Abstract
I examine the effect ofex antemanagement forecast accuracy on the post-earnings-announcement drift when management forecasts about next quarter's earnings are bundled with current quarter's earnings announcements. I build a composite measure ofex antemanagement forecast accuracy that takes into account forecast ability, forecast difficulty, and forecast environment. The results show that the bundled forecasts with higherex anteaccuracy mitigate investors' under-reaction to current earnings and reduce the magnitude of the post-earnings-announcement drift. Data Availability:The data used in this paper are available from the sources listed in the text.
Keywords
post-earnings-announcement drift, bundled management forecast, ex ante forecast accuracy
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