Unraveling a puzzle: The case of value line timeliness rank upgrades



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Value line timeliness ranks • Post-earnings announcement drift •Upgrades • Post-upgrade drift • Momentum


We examine a sample of Value Line’s timeliness rank upgrades that occur

immediately following earnings announcements and find that pre-event price momentum

has significant incremental explanatory power for post-event drift, after controlling

for the level of earnings surprise. Therefore, the stock price drift following Value

Line’s timeliness upgrades cannot be viewed as driven only by the post-earnings announcement

drift phenomenon. Instead, these findings indicate that, among other factors,

Value Line has been exploiting the price momentum effect for decades. Black

(Financ. Anal. J. 29:10–14, 1973) clearly stated that it does indeed do this, but his

assertion has not yet been verified as an explanation of the puzzling drift that follows

Value Line rank upgrades.

Published in

Financial Markets and Portfolio Management

Citation/Other Information

25(4), 379-409.