How asking unique questions shifts transparency and narratives in earnings calls

A recent study by Kristian D. Allee, Chuong Do, and Huy N. Do, investigates the role of analyst questioning during earnings conference calls. The paper, titled "Can analysts elicit useful information by asking unique questions in earnings conference calls?” uses a dataset of over 99,000 transcripts, as well as analyst information and news, to evaluate how the uniqueness of an analyst's questions impacts the course of the call, and market reaction.

To understand how recent news coverage influences the types of questions analysts ask, the study integrates news analytics from RavenPack. Concretely, the paper leverages RavenPack's Aggregate Event Sentiment (AES) and Aggregate Event Volume (AEV) scores to analyze how press coverage preceding earnings calls shapes analysts' information-gathering strategies.

Negative press leading up to a call can prompt analysts to ask more diverse questions, perhaps to reflect investor concerns. Similarly, a surge in news coverage before the call leads analysts to delve deeper with questions that differ more from the management narrative.

Interestingly, negative press leading up to a call can prompt analysts to ask more diverse questions, perhaps to reflect investor concerns. Similarly, a surge in news coverage before the call leads analysts to delve deeper with questions that differ more from the management narrative. This could be a way for analysts to showcase their expertise in a highly visible setting.

Here are some of the other key findings of the paper:

Key Findings

• Analysts with more private information ask more unique questions. This suggests that they are probing for specific information not readily available.
• Unique questions lead to broader discussions of topics, with business leaders being more inclined to provide more information when analysts ask questions outside the script.
• Analysts asking unique questions are more likely to revise their forecasts, as the call is more likely to provide them with new information.
• The market reacts more strongly to forecasts from analysts asking unique questions, as investors perceive these analysts as having better information or strategies.

Overall, the study provides valuable insights for investors who want to consider the characteristics and questioning style of analysts when evaluating their forecasts. It also offers guidance to analysts themselves, suggesting that crafting unique and well-informed questions can lead to better information gathering and ultimately, more accurate forecasts.