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Analyst Days, Stock Prices, and Firm Performance Analysis

Last Updated on 10 February, 2024 by Rejaul Karim

Analyst Days, Stock Prices, and Firm Performance” is a research paper by Di (Andrew) Wu and Amir Yaron which examines the impact of analyst days on financial markets. Analyst days are firm-hosted events where equity analysts and institutional investors gather to receive information disclosed by the hosting company.

The study constructs a comprehensive dataset of 3,890 analyst days to analyze the relationship between these events and abnormal returns. Despite the Regulation Fair Disclosure requirement mandating simultaneous public disclosure, the authors find that firms hosting analyst days experience significantly higher abnormal returns post-event.

This result suggests that market participants underreact to the positive incremental information presented during analyst days. Furthermore, the research highlights that event types, such as product announcements and market-related discussions, contribute to higher returns compared to reviews of past financial results.

Ultimately, the paper uncovers valuable insights into the correlation between analyst days, stock prices, and a company’s overall performance.

Abstract Of Paper

We construct a comprehensive dataset of 3,890 analyst days, which are firm-hosted gatherings where information is disclosed to equity analysts and institutional investors. We demonstrate that firms holding these events have significantly higher abnormal returns after these events, despite the Regulation Fair Disclosure requirement that such information be simultaneously disclosed to the public. A buy-and-hold strategy that holds these stocks for 20 days earns a market-adjusted return of 1.6%, and a similar calendar-time portfolio has a one-month, four-factor alpha of 1.8%. We find no evidence of mean reversion or change in risk exposure after analyst days, and abnormal returns remain significantly positive for up to six months. We classify analyst days into four major types—product announcement, review of results, discussion of strategy, and technology and markets—according to the textual content of their announcements, and we show that product- and market-related analyst days earn significantly higher returns than events reviewing past financial results. Finally, firms holding analyst days have significantly higher revenue growth, earnings per share, and dividend yields up to two years after these events. Analyst coverage, earning estimates, and price targets also increase, and these estimates have lower dispersion. Our results thus suggest that firms use analyst days to convey positive incremental information that has not been incorporated in their stock prices, and market participants significantly underreact to this information.

Original paper – Download PDF

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Author

Di (Andrew) Wu
University of Michigan, Stephen M. Ross School of Business

Amir Yaron
Bank of Israel; University of Pennsylvania — Wharton School of Business; National Bureau of Economic Research (NBER)

Conclusion

In conclusion, the research paper “Analyst Days, Stock Prices, and Firm Performance” by Di (Andrew) Wu and Amir Yaron investigates the connection between analyst day events and abnormal stock returns.

Using a comprehensive dataset of 3,890 analyst days, the authors discover that firms holding such events experience a significant increase in abnormal returns, despite the Regulation Fair Disclosure requirement for simultaneous public information dissemination. Their results also indicate that market participants underreact to the positive incremental information conveyed during these events.

Additionally, the study shows that product- and market-related analyst days generate higher returns than events reviewing past financial results. Firms hosting analyst days display significantly higher revenue growth, earnings per share, and dividend yields up to two years post-event.

Overall, this research provides valuable insights into the effects of analyst days on stock prices and firm performance, highlighting the significance of these events for market participants.

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FAQ

Q1: What is the focus of the research paper “Analyst Days, Stock Prices, and Firm Performance” by Di (Andrew) Wu and Amir Yaron?

The paper examines the impact of analyst days, firm-hosted events where information is disclosed to equity analysts and institutional investors, on financial markets. It analyzes a dataset of 3,890 analyst days to understand the relationship between these events and abnormal returns.

Q2: Despite the Regulation Fair Disclosure requirement, how do firms hosting analyst days experience abnormal returns, and what does this suggest about market participants’ reactions?

The authors find that firms hosting analyst days experience significantly higher abnormal returns post-event, despite the Regulation Fair Disclosure requirement for simultaneous public disclosure. This result suggests that market participants tend to underreact to the positive incremental information presented during analyst days.

Q3: How does the research classify analyst days, and what are the findings regarding the impact on stock prices and firm performance?

The study classifies analyst days into four major types: product announcement, review of results, discussion of strategy, and technology and markets. It reveals that product- and market-related analyst days generate significantly higher returns compared to events reviewing past financial results. Firms holding analyst days also exhibit higher revenue growth, earnings per share, and dividend yields up to two years after these events.

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