Download or read book Implications of Sticky Cost Behavior for Earnings Surprise and Market Reaction written by Janice Yun-Sheng Chen and published by . This book was released on 2013 with total page 98 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation examines the cost behavior model implicit in analysts' and investors' decisions. Even though a cost behavior model that recognizes fixed and variable costs and cost stickiness can provide more accurate earnings forecasts, analysts and investors cannot fully capture sticky cost information. Since analysts are not fully aware of the correct cost behavior model, earnings surprises can be largely explained by a cost model that recognizes sticky stickiness. Similarly, investors' under-reaction to sticky cost information relates to post-earnings announcement drifts. As a result, positive abnormal returns can be earned by a trading strategy that takes advantage of investors' lower awareness of sticky cost information.