Don’t You Know? They are Talking About a Revaluation—Market Reactions to Gains or Losses on Investment Property and Earnings Call Sentiment

This paper shows that revaluation gains or losses, in accordance with IAS 40 – Investment Property, affect stock price reactions within short windows around announcement dates. Furthermore, valuation-related sentiment expressed by managers and analysts during earnings calls is positively correlated with market reactions. When external valuations are referenced during earnings calls, revaluation gains or losses exhibit a stronger correlation with market responses. Sentiment in valuation-related sentences is also positively associated with future revaluation gains or losses. There is limited evidence that a factor capturing cross-country institutional variation—specifically in terms of the reliability and persistence of revaluation gains or losses—moderates the relationship between managerial sentiment in the Q&A section and market reactions. This study provides three tools that may be useful for investors and analysts: IAS40BERT-sentences, which identifies valuation-related sentences; IAS40BERT-extval, which detects references to external valuers; and IAS40BERT-sentiment, which measures valuation-related sentiment.