Title
Unraveling a puzzle: The case of value line timeliness rank upgrades
Department/School
Accounting
Date of this version
2011
Document Type
Article
Keywords
Value line timeliness ranks • Post-earnings announcement drift •Upgrades • Post-upgrade drift • Momentum
Abstract
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.
Volume
25
Issue
4
Published in
Financial Markets and Portfolio Management
Citation/Other Information
25(4), 379-409.