Revenue Surprises and Stock Returns

Revenue Surprises and Stock Returns
Author(s): Jegadeesh, Narasimhan and Livnat, Joshua
Year: 2005
Paper Number: GBS-FIN-2005-006
Goizueta Department: Finance

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Abstract

This paper examines the relation between revenue surprises, and contemporaneous and future stock returns. It also investigates whether analysts update their earnings forecasts in response to revenue surprises in a timely and unbiased fashion. The results indicate that the stock price reaction on the earnings announcement date is significantly related to contemporaneous, as well as past revenue surprises. We find significant abnormal returns in the post announcement period for stocks that have large revenue surprises, after controlling for earnings surprises. Although analysts revise their forecasts of future earnings in response to revenue surprises, they are slow to fully incorporate the information in revenue surprises.

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• Revenue Growth and Stock Returns (deposited 09 August 2005)
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