Finance

Accounting

Business

Actuarial science

Audit

Earnings per share

Earnings surprise

Earnings

Mathematics

Corporate finance

Earnings before interest, taxes, depreciation, and amortization

Financial economics

Dividend

Statistics

Logistic regression

Odds

Post-earnings-announcement drift

Econometrics

Balance sheet

Psychology

Multivariate statistics

Economics

Cash flow

Univariate

Income statement

Financial statement

Surprise

Social psychology

Review of Accounting Studies

Since 2001, the number of financial statement line items forecasted by analysts and managers that I/B/E/S and FactSet capture in their data feeds has soared. Using this new data, we find that 13 item surprises—11 income statement-based and 2 cash flow statement-based analyst and management guidance surprises—reliably explain firms’ signed earnings announcement returns. No balance sheet or expense surprises are significant. The most important surprises are (i) one-quarter-ahead sales guidance surprise, (ii) analyst sales surprise, (iii) annual Street earnings guidance surprise, and (iv) analyst Street earnings surprise. We also find that the adjusted R2s of our multivariate regressions are three times higher than the adjusted R2s of univariate Street earnings surprise regressions, and that the four most important surprises account for approximately half of this increase in explanatory power.

Explaining firms’ earnings announcement stock returns using FactSet and I/B/E/S data feeds