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The Interpretation of Unanticipated News Arrival and Analysts’ Skill

  • Amir Rubin, Benjamin Segal and Dan Segal


Analysts’ functions are divided into discovery and interpretation roles, but distinguishing between the two is nontrivial. We conjecture that analysts’ interpretation skill can be gauged by their forecast revisions following material unanticipated news, in particular, following nonearnings 8-K reports, which arrive at the market unexpectedly. We establish that unanticipated 8-Ks are informative for analysts and find that analysts who are more likely to revise their forecasts following unanticipated 8-Ks provide more timely and accurate forecasts. We document a positive association between analysts’ tendency to react to unanticipated 8-Ks and market reaction to their recommendation changes, suggesting investors prefer these analysts’ opinions.


Corresponding author

* Rubin,, Interdisciplinary Center Herzliya and Beedie School of Business, Simon Fraser University; B. Segal (corresponding author),, Fordham University and Hebrew University of Jerusalem; and D. Segal,, Interdisciplinary Center Herzliya.


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We thank Jarrad Harford (the editor) and Senyo Tse (the referee); seminar participants at Singapore Management University, Tel-Aviv University, INSEAD, and Hong Kong Polytechnic University; and conference participants at the 2013 Temple University Accounting Conference, the 2013 INSEAD Accounting Symposium, and the 2014 American Accounting Association annual meeting.



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