Earnings forecast revisions and security returns: ...

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Title Earnings forecast revisions and security returns: Canadian evidence
Author(s) Sean M. Hennessey
Date 1995
Volume 25
Issue 100
Start page 240
Abstract The impact that revisions of financial analysts' forecasts of earnings have on Canadian security returns during the 1979-1988 period is tested using an event study methodology. A post-revision announcement drift in security prices is documented; the Canadian capital market displays a marked delay in reacting to positive revisions in earnings forecasts. Contingent on revision size, positive and significant excess returns are apparent for up to 7 months following their release. The returns, before transaction costs, are not marginal; over a 12-month holding period, excess returns are 18.2%. The results for negative and non-revisions in earnings forecasts suggest that the market reacts quite efficiently to the information implicit in these events.

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