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Conference Calls Get Grouchier in the Afternoon

Afternoon earnings conference calls tend to be more negative, irritable and combative than those held in during the morning hours. This worsening conversational tone is associated with weaker stock price performance.

The weaker performance is particularly notable for companies reporting good news, defined as meeting or beating estimates, but holding their conference calls in the afternoon. Shares of these companies tend to experience a lower positive drift over the 50 days following the call relative to shares of companies holding their conference calls in the morning. Bad earnings news, defined as missing expectations, results in a seven-day drop for shares of companies reporting both in the morning and the afternoon that tends to be reversed afterward.

While there is not a direct impact on abnormal returns over the 50-day period following a conference call, there is a negative, lasting effect caused by the tone of the question-and-answer sessions. Holding a conference call at 3:00 p.m. instead of 8:00 a.m. increases net negativity. The greater negativity results in a 0.37% price decline for one quarter and a 1.5% decline for four quarters.

These findings are based on an analysis of more than 26,000 transcripts for earnings conference calls held between 2001 and 2007. All of the companies were publicly traded, headquartered in the United States and initiated calls between 8:00 a.m. and 4:59 p.m. Eastern time.

The study’s authors link the increased negativity to fatigue. Early in the morning, call participants are well-fed and rested. As the day goes on, they become cognitively taxed and experience the physical effects from a lack of food. This would explain why the tone of conversations temporarily improves after the lunchtime, only to become more negative, irritable, and combative as the day goes on. A second slight improvement does occur after the market closes, suggesting some respite from the ending of the trading day.

Source: “Oh What a Beautiful Morning! The Time of Day Effect on the Tone and Market Impact of Conference Calls,” Jing Chen, Elizabeth Demers and Baruch Lev, July 2013.


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