Some facts on Earnings Announcements and Analyst Revisions
Unless otherwise mentioned, the following statistics are based on all earnings events in CIQ (Capital IQ) since 2007.
Because we need timestamps at the second level, events that have a zero time component in CIQ (e.g., 2001-01-01 00:00:00) are ignored.
1 Time of Announcement
There are two popular announcement times:
- Before market open: 6 am to 9 am
- After close: 4 pm to 5 pm
10 means 10:00 to 10:59
2 Time of Calls
- Most calls are in the morning session (8 am to 11 am)
- Others are after market close (4 pm to 5 pm)
2.1 Lag of Calls
Calls are always after the announcement. How long is the lag?
- 77.3% are on the same day
- 22.4% are on the next day
3 Determine day 0 in CAR
While calculating post-announcement CAR(0,T), we need to determine which day is day 0 (i.e., the earnings call day). It turns out this is not trivial.
Appendix A of (Meursault et al., 2021) discusses this problem.
Using RDQ provided by CIQ as day 0 of CAR is problematic: If the event is before market close, then RDQ as day 0 is fine, but if the event is after market close, then day 0 should be the next trading day.
The following figure shows the daily AR when we treat RDQ as day 0. You see both day 0 and day 1 have large ARs.
Now let’s use the adjusted event time by 1) improving the timestamps with RavenPack, and 2) applying the 3 pm rule. See Appendix A of (Meursault et al., 2021) for details. As you can see, most of the AR is concentrated on day 0 now.
A potential concern is earnings calls. Since earnings calls are after the announcements, will such lags impact the AR distribution?
The answer is no. See the following figure: It’s almost identical to carday0_ann. The reason is that most announcements are after market close and the follow-up calls are on the same or next day. So after we apply the “3 pm rule,” the day 0 for announcements and calls are identical.
Now we can safely use carday0_call without worrying about losing any AR.
4 Revision lag
We observe that
- most revisions are made in the first two days;
- the bump after day 75 is because of the approaching next earnings announcement.
5 References
- Meursault, V., Liang, P. J., Routledge, B. R., & Scanlon, M. M. (2021). PEAD.txt: Post-Earnings-Announcement Drift Using Text. Journal of Financial and Quantitative Analysis, 1–50. ^1