Abstract
We examine a sample of Value Line’s timeliness rank upgrades that occur immediately following earnings announcements and find that pre-event price momentum has significant incremental explanatory power for post-event drift, after controlling for the level of earnings surprise. Therefore, the stock price drift following Value Line’s timeliness upgrades cannot be viewed as driven only by the post-earnings announcement drift phenomenon. Instead, these findings indicate that, among other factors, Value Line has been exploiting the price momentum effect for decades. Black (Financ. Anal. J. 29:10–14, 1973) clearly stated that it does indeed do this, but his assertion has not yet been verified as an explanation of the puzzling drift that follows Value Line rank upgrades.
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