Watch the Reporting Date

How will you know if a stock beats earnings? Consider this novel indicator:

The indicator you should watch: Whether or not a company changes its earnings reporting date, and whether than change moves the date forwards or backwards.

Not surprisingly, if the date moves up, the news is usually good. If it moves back? Probably not good. Professor So, who is the Sarofim Family Career Development Professor and an assistant professor at the MIT Sloan School of Management. says the simple rule is human nature. People rush home to tell their families good news, and tend to keep quiet about bad news.

Professor So looked at eight years’ of earnings announcements — 19,000 firms between 2006 and 2013. Firms that move up their announcements earn 2.6% more than the firms that delay announcements over the month following earnings calendar revisions. “The magnitude of this mispricing is massive,” So said in a statement.

This is interesting and it makes sense. Fourth-quarter earnings season begins on Wednesday.

Posted by on October 6th, 2014 at 9:07 pm


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