Cornell Study Documents Hospitality Stock Reactions to Earnings Surprises
Despite Some Drift, Hospitality Stocks Pricing Is Relatively Efficient
A new study from the Cornell Center for Hospitality Research (CHR) finds that hospitality stocks are relatively efficient in reacting to earnings surprises. The study, “Earnings Announcements in the Hospitality Industry: Do You Hear What I Say?,” by Pamela C. Moulton and Di Wu, examined the effect of earnings surprises on hospitality stocks in particular (in contrast to previous studies that have examined all stocks together, irrespective of their industries). The report is available at no charge from the CHR website.
“When there’s a surprise in a company’s earnings announcement, a stock’s price will react quickly and then the price will continue drifting in the same direction. We noted that the stock prices for stocks in general tend to drift for up to 60 trading days, and so we wondered if the same was true for hospitality stocks,” said Moulton, an assistant professor at the Cornell School of Hotel Administration. “Hospitality stock prices do drift, but only for about 20 trading days, so we view hospitality stocks as being more efficient than stocks in general.”
Moulton and Wu found that stock analysts are somewhat slow in revising their forecasts for future earnings in the hospitality sector, which may be one source of earnings surprises. Wu is a Ph.D. student in the Charles H. Dyson School of Applied Economics and Management, at Cornell’s College of Agriculture and Life Sciences.
About The Center for Hospitality Research
A unit of the Cornell School of Hotel Administration, The Center for Hospitality Research (CHR) sponsors research designed to improve practices in the hospitality industry. Under the lead of the center's 78 corporate affiliates, experienced scholars work closely with business executives to discover new insights into strategic, managerial and operating practices. The center also publishes the award-winning hospitality journal, the Cornell Hospitality Quarterly. To learn more about the center and its projects, visit www.chr.cornell.edu.
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