Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments April 10, 2020 erstellt
Description:
Management forecasts have an average horizon of only six months, which requires investors to estimate the persistence of forecast news. We show that about 90% of the information impounded into returns at forecast announcements relates to earnings realized beyond the forecast horizon. Examining returns and earnings beyond the forecast horizon reveals two key findings. First, we show forecasted earnings are less persistent than non-forecasted earnings. Second, we show that the large market reaction to management forecast announcements (e.g. Beyer et al. 2010) are followed by return reversals beyond the forecast horizon. These return reversals are higher when the forecast news can be expected to be less persistent, consistent with investors overestimating the persistence of forecasted earnings. Overall, our findings suggest that investors overreact to management forecasts and that aligning investor beliefs with managers' private information about short-horizon earnings through managerial forecasts may lead to misalignment at longer horizons