Time Will Tell: Information in the Timing of Scheduled Earnings News

Mon October 31, 2016

Travis L. Johnson, The University of Texas at Austin

Eric C. So, MIT Sloan School of Management

**updated October 2016

Wall Street Horizon Abstract

This study demonstrates that earnings calendars have strong predictive power for firms’ earnings news and future returns. Investors who monitor revisions to earnings announcement dates and act on it can earn returns of more than 2.5% per month. Using data from Wall Street Horizon, the authors answer the following important questions: How do investors respond to signals conveyed through the timing of earnings announcements? Is there a correlation between the schedule of earnings announcements and reported performance?

While surprising, the results show that firms that advance their earnings announcement dates outperform firms that delay by an average of 260 bps in the month after the revision. Positive value is realized from the advancers and negative value from the delayers. This means investors can gain equally from both types of revisions.

Not only do advancers’ stocks outperform compared to delayers, they also report greater return on assets, same quarter growth in return on assets and analyst based earnings surprises.

This paper demonstrates that the timing of earning events impacts not only the performance of equity stocks, but also affects the pricing of options and options trading.

The authors conclude that calendar revisions should be treated as a significant source of information ahead of the actual announcement.  Investors who track these revisions and timely confirmations can generate additional alpha or avoid risk in their portfolios.

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From the original release of the paper:

Video produced by MIT Sloan:  Professor So demonstrates how firm-initiated revisions in earnings announcement dates can predict a firm's future earnings news and provide a signal for superior investment returns.

Video from The Power of Corporate Events Boston:  Professor So discusses his paper using real world examples of how earnings calendar revisions can predict future excess stock returns.

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Note:  While the academics listed made extensive use of Wall Street Horizon corporate events data, please note Wall Street Horizon does not sponsor academic research; all papers are conducted independently by the researchers and their teams at their respective organizations.