Are Analysts' Forecasts Informative to the General Public?

Oya Altınkılıç (), Vadim S. Balashov () and Robert Hansen
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Oya Altınkılıç: School of Business, George Washington University, Washington, DC 20052
Vadim S. Balashov: School of Business--Camden, Rutgers, the State University of New Jersey, Camden, New Jersey 08102

Management Science, 2013, vol. 59, issue 11, 2550-2565

Abstract: 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.

Keywords: analysts' forecasts; financial analysts; financial markets; investment banking; market efficiency; security analysts (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (34)

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