Date of Submission
Campus Only Senior Thesis
Bachelor of Arts
This paper investigates a potential cause of the observed growth in the magnitude of earnings response coefficients over time since 2001. I hypothesize that the growth is explained by increasing investor reliance on Wall Street analyst earnings per share (“EPS”) estimates to form their next-period EPS expectations. To test my hypothesis, I regress 3-day cumulative abnormal market returns following earnings announcements on an interaction term between the earnings surprise and the number of analyst EPS estimates along with several control variables. I ultimately find no evidence of increasing investor reliance on Wall Street analyst estimates. Furthermore, I fail to replicate the results of prior literature that found an upward trend in earnings response coefficients over time from 2001 to 2011. These contradictory results merit further investigation in future research.
Scheuer, Joseph L., "Growing Earnings Response Coefficients: Are analysts getting smarter, or are investors getting lazy?" (2019). CMC Senior Theses. 2251.
This thesis is restricted to the Claremont Colleges current faculty, students, and staff.