Street Earnings Activation Delay

Street earnings are non-GAAP earnings, adjusted for consistency with the analyst majority basis and disseminated by forecast data providers (FDPs). We find that the time it takes an FDP to incorporate street earnings in its products (activation delay, here-after) reflects variation in the difficulty of constructing street earnings, investor demand for timely street earnings, and FDP's limited attention and resources. Furthermore, activation delay explains the delay with which street earnings are incorporated in analyst forecasts and stock prices. Finally, we find greater price discovery in the hour after street earnings are activated than the hour before. We conclude that frictions in information processing prevent market participants from instantaneously constructing and incorporating street earnings in their decisions, and that FDPs play a key role in alleviating these frictions. Keywords: street earnings, forecast data providers, information processing, market reactions.