SEC FRR No. 48 and analyst forecast accuracy

Bing-Xuan Lin and Chen-Miao Lin

Applied Economics Letters, 2017, vol. 24, issue 6, 427-432

Abstract: SEC FRR No. 48 requires that all firms report their market risk exposures by choosing among three alternative formats: sensitivity analysis, tabular and value at risk (VaR). In this article, we examine how different methods affect analyst forecast accuracy. By regressing analyst forecast errors on a company’s choice of disclosure method, we find that analyst forecast errors are smaller for firms using VaR and tabular than for firms using sensitivity analysis. Our findings suggest that VaR and tabular approaches are more informative than sensitivity analysis.

Date: 2017
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DOI: 10.1080/13504851.2016.1200174

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