IDEAS home Printed from https://ideas.repec.org/a/fma/fmanag/cornell01.html
   My bibliography  Save this article

Is the Response of Analysts to Information Consistent with Fundamental Valuation? The Case of Intel

Author

Listed:
  • Bradford Cornell

Abstract

This paper examines the market reaction to a press release issued by Intel on Thursday, September 21, 2000. In response to that release, Intel’s stock price dropped 30%, erasing over $120 billion of shareholder wealth. By analyzing the press release in conjunction with analyst reports, and by using a discounted cash flow valuation model, I argue that the information conveyed by the announcement was not sufficient to explain the stock price drop. Surprisingly, analysts were more strongly recommending purchase of the stock in August 2000 at $75 than in September 2000 at $40. This suggests a positive feedback between stock price movements and analyst recommendations that may increase the volatility of prices.

Suggested Citation

  • Bradford Cornell, 2001. "Is the Response of Analysts to Information Consistent with Fundamental Valuation? The Case of Intel," Financial Management, Financial Management Association, vol. 30(1), Spring.
    • Handle: RePEc:fma:fmanag:cornell01
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Coleman, Les, 2014. "Why finance theory fails to survive contact with the real world: A fund manager perspective," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 25(3), pages 226-236.
    2. Tawatnuntachai, Oranee & Yaman, Devrim, 2007. "Do investors overreact to earnings warnings?," Review of Financial Economics, Elsevier, vol. 16(2), pages 177-201.
    3. Chang, Chih-Hsiang & Chan, Kam C., 2011. "Investment banks' stock ratings, call warrant issuance, and responses from heterogeneous investors: Evidence from Taiwan," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 733-743, October.
    4. William Baker & Gregory Dumont, 2014. "Equity Analyst Recommendations: A Case for Affirmative Disclosure?," Journal of Consumer Affairs, Wiley Blackwell, vol. 48(1), pages 96-123, March.
    5. Weaver, Samuel C. & Weston, J. Fred, 2003. "A Unifying Theory of Value Based Management," University of California at Los Angeles, Anderson Graduate School of Management qt0xw5m9mz, Anderson Graduate School of Management, UCLA.
    6. Ruei-Shian Wu & Hsiou-wei W. Lin, 2014. "Security analysts' incentive and cognitive processing bias: evidence from analysts' recommendations," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 21(4), pages 443-471, December.
    7. Loh, Roger & Mian, G. Mujtaba, 2005. "Do Accurate Earnings Forecasts Facilitate Superior Investment Recommendations?," Working Paper Series 2004-17, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    8. Sherrill Shaffer, 2008. "Earnings Valuation And Sources Of Growth," CAMA Working Papers 2008-32, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    9. Oranee Tawatnuntachai & Devrim Yaman, 2007. "Do investors overreact to earnings warnings?," Review of Financial Economics, John Wiley & Sons, vol. 16(2), pages 177-201.
    10. Conrad, Jennifer S & Cornell, Brad & Landsman, Wayne R. & Rountree, Brian, 2004. "How do Analyst Recommendations Respond to Major News?," University of California at Los Angeles, Anderson Graduate School of Management qt9vx341wh, Anderson Graduate School of Management, UCLA.
    11. Loh, Roger K. & Mian, G. Mujtaba, 2006. "Do accurate earnings forecasts facilitate superior investment recommendations?," Journal of Financial Economics, Elsevier, vol. 80(2), pages 455-483, May.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fma:fmanag:cornell01. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Courtney Connors (email available below). General contact details of provider: https://edirc.repec.org/data/fmaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.