Are Analysts' Forecasts Informative to the General Public?

Contrary to the common view that analysts are important information agents, intraday returns evidence shows that announcements of analysts' forecast revisions release little new information, on average. Further cross-sectional evidence from returns around the announcements confirms that revisio...

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Bibliographic Details
Published in:Management science 2013-11, Vol.59 (11), p.2550-2565
Main Authors: Altinkiliç, Oya, Balashov, Vadim S., Hansen, Robert S.
Format: Article
Language:English
Subjects:
Analysis
analysts' forecasts
Analytical forecasting
Brokerages
Cross-sectional analysis
Earnings
Economic theory
Efficient markets
Finance
Financial accounting
Financial analysis
Financial analysts
Financial economics
financial markets
Financial planners
Forecasting
Forecasts
Information
Investment banking
Investments
Investors
Management science
market efficiency
Methods
Net income
Night tables
Practice
Prices
Rates of return
Revisions
security analysts
Stock price forecasting
Stock prices
Studies
U.S.A
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Summary:Contrary to the common view that analysts are important information agents, intraday returns evidence shows that announcements of analysts' forecast revisions release little new information, on average. Further cross-sectional evidence from returns around the announcements confirms that revisions are virtually information free. Daily announcement returns used in the literature appear to overstate the analyst's role as information agent, because forecast announcements are often issued directly after reports of significant news about the followed firm. The evidence reveals a sequential relationship between events and news and forecast revisions indicative of analyst piggybacking, not prophecy. These new findings about the most sought-after analyst reports broaden significantly the evidence indicating that price reactions to analysts' reports reveal little new information. This paper was accepted by Brad Barber, finance.
ISSN:0025-1909
1526-5501
DOI:10.1287/mnsc.2013.1721