Druz, Marina, Alexander F. Wagner, and Richard J. Zeckhauser. "Reading Managerial Tone: How Analysts and the Market Respond to Conference Calls." HKS Faculty Research Working Paper Series RWP16-004, January 2016.
Conference call tone predicts future earnings and uncertainty. “Tone disappointment” (excessive negativity) predicts more strongly than “tone delight” (excessive positivity). However, analysts and investors respond more quickly to delight than disappointment. Consequently, stock prices drift downward after their initial reaction to tone disappointment. Tone surprises move stock prices more in those firms where tone surprise predicts earnings and uncertainty more strongly. These results hold even after controlling for negativity of words in the earnings press release, analyst expectations, the firm’s recent performance, and CEO fixed effects. Together, these coherent results suggest that market participants distill value-relevant information from conference calls.