Do analysts' earnings forecasts incorporate information in prior stock price changes?

This research examines whether analysts' earnings forecasts incorporate information in price changes. Even if the forecasts do not explicitly depend upon price changes,there should nevertheless be a positive association between analysts' forecast revisions and prior price changes. Moreover...

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Bibliographic Details
Published in:Journal of accounting & economics 1991-06, Vol.14 (2), p.147-165
Main Author: Abarbanell, Jeffery S.
Format: Article
Language:English
Subjects:
Analysts
Earnings forecasting
Economic models
Errors
Information
Market forecasts
Price variance
Statistical analysis
Stock prices
Stock returns
Studies
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Summary:This research examines whether analysts' earnings forecasts incorporate information in price changes. Even if the forecasts do not explicitly depend upon price changes,there should nevertheless be a positive association between analysts' forecast revisions and prior price changes. Moreover, if analysts incorporate only their private information in formulating a forecast and ignore price changes, then the likelihood that their estimate is less than (greater than) the realization increases following price increases (decreases). Empirical results are consistent with these conjectures and indicate that analysts' forecasts do not fully reflect the information in prior price changes.
ISSN:0165-4101
1879-1980
DOI:10.1016/0165-4101(91)90003-7