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Time Stamp Errors and the Stock Price Reaction to Analyst Recommendation and Forecasts Revisions

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Author Info

  • Hoechle, Daniel

    ()

  • Schaub, nic

    ()

  • Schmid, Markus

    ()

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    Abstract

    This paper investigates the problem of time stamp errors in the IBES database. We show that IBES did not store the original announcement date of both recommendations and forecasts on U.S. stocks until 2001 and even later for other countries. The announcement date in IBES is often effectively the date on which the information was recorded by IBES and, therefore, systematically delayed. Using event study analysis and comparing IBES to alternative data sources, we show that the announcement day effect is underestimated in IBES while pre-announcement returns are overestimated as they often include the effective announcement day. We also show that time stamp errors in IBES are not randomly distributed in the cross-section but differ significantly across several firm, broker, and analyst characteristics. A consequence is that cross-sectional differences in announcement returns may be driven by cross-sectional differences in time stamp errors. We also show how existing research is affected by time stamp errors in IBES. Finally, we suggest three alternative ways to mitigate the time stamp error problem in daily IBES data.

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    File URL: http://www1.vwa.unisg.ch/RePEc/usg/sfwpfi/WPF-1215.pdf
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    Bibliographic Info

    Paper provided by University of St. Gallen, School of Finance in its series Working Papers on Finance with number 1215.

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    Length: 59 pages
    Date of creation: Feb 2012
    Date of revision: Oct 2013
    Handle: RePEc:usg:sfwpfi:2012:15

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    Related research

    Keywords: Analyst recommendations; Analyst forecasts; Stock price reaction; Pre-announcement effect; Time stamp errors; Data providers.;

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    1. Hugon, Artur & Muslu, Volkan, 2010. "Market demand for conservative analysts," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 50(1), pages 42-57, May.
    2. Green, T. Clifton, 2006. "The Value of Client Access to Analyst Recommendations," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 41(01), pages 1-24, March.
    3. Frankel, Richard & Kothari, S.P. & Weber, Joseph, 2006. "Determinants of the informativeness of analyst research," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 41(1-2), pages 29-54, April.
    4. Christophe, Stephen E. & Ferri, Michael G. & Hsieh, Jim, 2010. "Informed trading before analyst downgrades: Evidence from short sellers," Journal of Financial Economics, Elsevier, Elsevier, vol. 95(1), pages 85-106, January.
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    9. Jacob, John & Lys, Thomas Z. & Neale, Margaret A., 1999. "Expertise in forecasting performance of security analysts," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 28(1), pages 51-82, November.
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    11. AltInkIlIç, Oya & Hansen, Robert S., 2009. "On the information role of stock recommendation revisions," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 48(1), pages 17-36, October.
    12. Yonca Ertimur & Jayanthi Sunder & Shyam V. Sunder, 2007. "Measure for Measure: The Relation between Forecast Accuracy and Recommendation Profitability of Analysts," Journal of Accounting Research, Wiley Blackwell, Wiley Blackwell, vol. 45(3), pages 567-606, 06.
    13. Jung, Boochun & Shane, Philip B. & Sunny Yang, Yanhua, 2012. "Do financial analysts' long-term growth forecasts matter? Evidence from stock recommendations and career outcomes," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 53(1), pages 55-76.
    14. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, Econometric Society, vol. 48(4), pages 817-38, May.
    15. Alexander Ljungqvist & Christopher Malloy & Felicia Marston, 2009. "Rewriting History," Journal of Finance, American Finance Association, American Finance Association, vol. 64(4), pages 1935-1960, 08.
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