Download or read book The Stock Price Effects of Changes in Dispersion of Investor Beliefs during Earnings Announcements written by Lynn L. Rees and published by . This book was released on 2008 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: Existing research provides competing theories as to how dispersion of investor beliefs might affect stock prices. We measure changes in dispersion of investor beliefs around earnings announcements using changes in the dispersion of individual analysts' forecasts. We find that the three-day market response to earnings announcements is negatively associated with changes in dispersion, consistent with the cost of capital hypothesis. The results hold after controlling for the current earnings surprise, forecast revisions of future earnings, and reported earnings relative to various earnings thresholds. Our study provides new insight about the information contained within earnings announcements that is incremental to the magnitude and timing of cash flows.