| Popis: |
When an event is anticipated, the event-firm's stock return around the announcement of the event may have an inconsistent sign: a positive sign around negative news, or vice versa. We attempt to quantify the frequency of this problem, first with a brief mathematical model and simulation, then with empirical tests. These empirical tests employ data on analysts' upgrades, and use exogenous changes in the information environment surrounding analysts' upgrades to estimate the effect of anticipation on the sign of the abnormal return on announcement. We find that more than 10% of returns can have inconsistent signs, even with low levels of anticipation. Our results suggest that researchers should be cognizant of how anticipation can affect abnormal returns, and we offer a survey of the literature which suggests ways to adjust event-study applications to account for anticipation. |
