Great Expectations: Earnings Estimates and Their Impact on Stock Prices

Great Expectations: Earnings Estimates And Their Impact On Stock Prices Splash image

How often have you seen a stock’s price fall after the company announced increased earnings?

Or, just recently, why did the stock of investment banking firm Lehman Brothers soar after it announced that its fiscal first-quarter earnings fell 57%?

In these instances, actual earnings did not turn out as the market expected.

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Discussion

Michael from Kansas posted over 2 years ago:

How about an article on Operating Profit After Capital Charge (OPACC) and an SIP screen (1st Cut)? How would you calculate OPACC with SIP?

Thanks.


Charles from Illinois posted over 2 years ago:

Michael, I'll pass this along to John Bajkowski as a possible idea. -Charles Rotblut


Richard from Washington posted over 2 years ago:

It would be helpful to have more detailed data on earnings surprises. For example, if one buys a stock after a positive earnings surprise, how long does the positive effect of the surprise last (on the average) and how big is the effect? Also, how does the length and size of the effect depend on the size of the surprise?
Have there been academic studies of the effects described in the article? Could you please provide references so that we could read those studies?
Thanks.


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