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Overreaction to Intra-industry Information Transfers?




ABSTRACT Prior research has documented that earnings announcements provide information not only about the announcing firm but also about other firms in the same industry. We document a stock market anomaly associated with this phenomenon of intra-industry information transfers by showing that the stock price movements of late announcers in response to earnings reported by early announcers are negatively related to subsequent price responses of late announcers to their own earnings reports. Apparently, the stock market overestimates the intra-industry implications of early announcers' earnings for late announcers' earnings, and that overestimation is corrected when late announcers disclose their earnings. Copyright (c), University of Chicago on behalf of the Institute of Professional Accounting, 2008.

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  • Jacob Thomas & Frank Zhang, 2008. "Overreaction to Intra-industry Information Transfers?," Journal of Accounting Research, Wiley Blackwell, vol. 46(4), pages 909-940, September.
  • Handle: RePEc:bla:joares:v:46:y:2008:i:4:p:909-940

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    References listed on IDEAS

    1. Michael E. Porter, 1992. "Capital Choices: Changing The Way America Invests In Industry," Journal of Applied Corporate Finance, Morgan Stanley, vol. 5(2), pages 4-16.
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    Cited by:

    1. Masahiro Watanabe, 2003. "A Model of Stochastic Liquidity," Yale School of Management Working Papers ysm385, Yale School of Management.
    2. Chung, Dennis Y. & Hrazdil, Karel & Trottier, Kim, 2015. "On the efficiency of intra-industry information transfers: The dilution of the overreaction anomaly," Journal of Banking & Finance, Elsevier, vol. 60(C), pages 153-167.
    3. Haifeng You & Xiao-Jun Zhang, 2011. "Limited attention and stock price drift following earnings announcements and 10-K filings," China Finance Review International, Emerald Group Publishing, vol. 1(4), pages 358-387, September.
    4. Samuel M. Hartzmark & Kelly Shue, 2017. "A Tough Act to Follow: Contrast Effects In Financial Markets," NBER Working Papers 23883, National Bureau of Economic Research, Inc.
    5. Cox, Raymond A.K. & Dayanandan, Ajit & Donker, Han, 2016. "The Ricochet Effect of Bad News," The International Journal of Accounting, Elsevier, vol. 51(3), pages 385-401.
    6. John Eshleman & Peng Guo, 2014. "The market’s use of supplier earnings information to value customers," Review of Quantitative Finance and Accounting, Springer, vol. 43(2), pages 405-422, August.
    7. Chen, Long & Zhang, Gaiyan & Zhang, Weina, 2016. "Return predictability in the corporate bond market along the supply chain," Journal of Financial Markets, Elsevier, vol. 29(C), pages 66-86.

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