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They authors measure managerial affective states during earnings conference calls by analyzing conference call audio files using vocal emotion analysis software. They hypothesize and find that when managers are scrutinized by analysts during conference calls, positive and negative affect displayed by managers are informative about the firm's financial future. In particular, they find that managers exhibiting positive (negative) affect are positively (negatively) related to contemporaneous stock returns and future unexpected earnings. However, analysts do not incorporate the information when determining short term earnings forecasts. When making stock recommendation changes, however, analysts incorporate positive affect but not negative affect.
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