SECURITY RETURN DRIFT, ANALYSTS' EARNINGS FORECAST REVISIONS, AND QUANTITY OF INFORMATION

This paper considers the impact quantity of information has on the post-revision announcement drift in security prices following revisions of analysts' earnings forecasts for Canadian companies. The proxies used for quantity of information are analyst following, firm size, and share price. Since the information environment for widely followed, large, and high share price firms is "richer" than for neglected, small, or low price firms, drift is expected to be centred on low information securities. The results for the 8,095 revisions in the sample suggest that information deficiency only partially accounts for the drift following revisions. For positive revisions, small securities display a pronounced drift, peaking with an annualized post-revision CAR of almost 20% for revisions of at least 10%. The response to revisions does not appear to be associated with various levels of analyst following and share price. Trading costs do not appear to account for the drift. For negative revisions there is some indication that the well-documented analyst overestimation bias is associated with low share price securities.