The Relation Between Predisclosure Information and the Dispersion of Financial Analysts' Forecasts of Earnings

Previous studies have looked at the relation between stock price and 2 proxies for the degree of predisclosure information availability. A recent study uses the source of security behavior (dispersion) rather than stock price in order to analyze the relative ability of market value of equity and num...

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Bibliographic Details
Published in:Journal of business finance & accounting 1995-09, Vol.22 (6), p.855-866
Main Authors: Cho, Jang Y, Harter, Charles
Format: Article
Language:English
Subjects:
Disclosure
Earnings
Earnings forecasting
Equity
Forecasts
Information
Market value
Mathematical models
Regression analysis
Securities analysis
Stock prices
Studies
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Summary:Previous studies have looked at the relation between stock price and 2 proxies for the degree of predisclosure information availability. A recent study uses the source of security behavior (dispersion) rather than stock price in order to analyze the relative ability of market value of equity and number of analysts to proxy for predisclosure information. The results provide evidence that a negative correlation exists between the changes in dispersion of analysts' forecasts and market value of equity. No significant relation, however, existed between changes in dispersion and number of analysts after controlling for market value of equity and industry effects. These results imply that market value of equity is superior to number of analysts as an indication of predisclosure information availability/information asymmetry.
ISSN:0306-686X
1468-5957