Purdue University Graduate School
Dissertation - 6-25-19 Formatted.pdf (738.26 kB)

The Impact of the Verb Tense of Tone Words on Price Discovery in Conference Calls

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posted on 2019-08-12, 18:42 authored by Benjamin W AngeloBenjamin W Angelo

Prior empirical research has shown that forward-looking statements can be particularly informative to investors (Li 2010; Muslu et al. 2014). However, the inherent uncertainty surrounding forward-looking statements may contribute to a delayed price reaction. This paper examines the market reaction to backward-looking statements and to forward-looking statements across a 60 trading-day horizon. I did not find evidence suggesting the inherent uncertainty of forward-looking statements contributes to a delayed price reaction. However, backward-looking statements are associated with a delayed price response. This result is consistent with Bernard and Thomas’s (1990) suggestion that post-earnings announcement drift is caused by investors not fully understanding how current earnings map into future earnings. I also provide evidence that, for the prepared remarks, investors have a stronger price reaction to net backward-looking tone than to net forward-looking tone. However, for the question-and-answer session, the opposite is true. Investors have a stronger price reaction to net forward-looking tone than to net backward-looking tone. This result suggests that managers should focus their prepared remarks on the prior performance of the firm and focus their responses during the question-and-answer session on the future performance of the firm.


Degree Type

  • Doctor of Philosophy


  • Management

Campus location

  • West Lafayette

Advisor/Supervisor/Committee Chair

Dr. Mark Bagnoli

Advisor/Supervisor/Committee co-chair

Dr. Susan Watts

Additional Committee Member 2

Dr. Jonathan Black

Additional Committee Member 3

Dr. Theodore Goodman

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