Revenue Growth and Stock Returns

Narasimhan Jegadeesh
2002 Social Science Research Network  
This paper examines the relation between revenue surprises and stock returns. It also investigates how the market updates its earnings expectations following announcements of revenue surprises. The results indicate that the stock price reaction on the earnings announcement date is significantly related to the magnitude of revenue surprises, after controlling for earnings surprises. I also find a significant relation between analyst forecast errors and revenue and earnings surprises. In
more » ... prises. In addition, I find that analysts revise their forecasts of future earnings in response to revenue surprises. I also find significant abnormal returns in the post-announcement period for stocks that have large revenue surprises. Further examination of forecasts errors in the quarters after the earnings announcement quarter indicates that analysts are slow to incorporate the information in earnings and revenue surprises in the earnings forecasts.
doi:10.2139/ssrn.314962 fatcat:swr535sdgzgm7owtrvd4gkvv4y