Harvard Kennedy School Harvard University

Search this site

logo
Faculty Research Working Paper Series
Richard Zeckhauser
Frank Plumpton Ramsey Professor of Political Economy
phone: (617)495-1174
fax: (617)384-9340
Reading Managerial Tone: How Analysts and the Market Respond to Conference Calls
Druz, Marina, Alexander F. Wagner, and Richard J. Zeckhauser. "Reading Managerial Tone: How Analysts and the Market Respond to Conference Calls." HKS Faculty Research Working Paper Series RWP16-004, January 2016.
Abstract
Conference call tone predicts future earnings and uncertainty. “Tone disappointment” (excessive negativity) predicts more strongly than “tone delight” (excessive positivity). However, analysts and investors respond more quickly to delight than disappointment. Consequently, stock prices drift downward after their initial reaction to tone disappointment. Tone surprises move stock prices more in those firms where tone surprise predicts earnings and uncertainty more strongly. These results hold even after controlling for negativity of words in the earnings press release, analyst expectations, the firm’s recent performance, and CEO fixed effects. Together, these coherent results suggest that market participants distill value-relevant information from conference calls.
Attachment
pdf

 

 


Copyright © 2017 The President and Fellows of Harvard College