NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Marina Druz

Swiss Finance Institute
Università della Svizzera italiana

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Swiss Finance Institute, University of Zurich

NBER Working Papers and Publications

February 2015Tips and Tells from Managers: How Analysts and the Market Read Between the Lines of Conference Calls
with Alexander F. Wagner, Richard J. Zeckhauser: w20991
Stock prices react significantly to the tone (negativity of words) managers use on earnings conference calls. This reaction reflects reasonably rational use of information. “Tone surprise” – the residual when negativity in managerial tone is regressed on the firm’s recent economic performance and CEO fixed effects – predicts future earnings and analyst uncertainty. Prices move more, as hypothesized, in firms where tone surprise predicts more strongly. Experienced analysts respond appropriately in revising their forecasts; inexperienced analysts overreact (underreact) to tone surprises in presentations (answers). Post-call price drift, like post-earnings announcement drift, suggests less-than-full-use of information embedded in managerial tone.
 
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