Analyst information precision and small earnings surprises

This study proposes and tests an alternative to the extant earnings management explanation for zero and small positive earnings surprises (i.e., analyst forecast errors). We argue that analysts’ ability to strategically induce slight pessimism in earnings forecasts varies with the precision of their information. Accordingly, we predict that the probability that a firm reports a small positive instead of a small negative earnings surprise is negatively related to earnings forecast uncertainty, and we present evidence consistent with this prediction. Our findings have important implications for the earnings management interpretation of the asymmetry around zero in the frequency distribution of earnings surprises. We demonstrate how empirically controlling for earnings forecast uncertainty can materially change inferences in studies that employ the incidence of zero and small positive earnings surprises to categorize firms as suspected of managing earnings

Analysts’ recommendations: from which signal does the market take its lead?

Analysts’ recommendations, Market consensus, Signal metrics, G14,

Information asymmetry, liquidity and the dynamic volume-return relation in panel data analysis

In the paper we investigate the dynamic relation between returns and volume of individual stocks traded on the Warsaw Stock Exchange. Theoretical models suggest that this relation reveals the information asymmetry in the market and the role of private information. Unlike other works, we use dynamic regression to obtain the coefficients for 52 stocks, assuming that coefficients for individual stock can vary from month to month. Then we use panel regression with random effects to test the relationship between coefficient of information asymmetry and liquidity. We find an evidence supporting the compliance of measure of information asymmetry, especially for medium and small capitalization companies

Caldera size modulated by the yield stress within a crystal-rich magma reservoir

The largest volcanic eruptions in the geologic record have no analogue in the historical record. These eruptions had global impacts1,2, but are known only through their eruptive products. They have left behind calderas that formed as the surface collapsed when eruption evacuated magma chambers at 5–15 km depths3,4. It is generally assumed that calderas reflect the spatial dimensions of underlying magma reservoirs. Here we use a numerical model of conduit flow and dynamic magma-chamber drainage to show that caldera size can be affected by the material properties of crystal-rich silicic magma. We find that magma in the chamber can experience a rheological transition during eruption. This transition causes magma near the conduit to behave as a fluid, whereas magma farther away behaves elastically and remains locked. The intervening surface—the yield surface—expands through the chamber as eruption progresses. If a yielding transition occurs, calderas can form before complete mobilization of the entire reservoir. The resulting distribution of eruption volumes is then bimodal, as observed in the geologic record. We suggest that the presence or absence of a magma yield stress determines whether caldera size reflects the true spatial extent of magma storage