Does soft information matter for financial analysts' forecasts? A gravity model approach

Régis Breton (), Sébastien Galanti, Christophe Hurlin and Anne-Gaël Vaubourg ()
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Anne-Gaël Vaubourg: LEO - Laboratoire d'économie d'Orleans [2008-2011] - UO - Université d'Orléans - CNRS - Centre National de la Recherche Scientifique

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Abstract: We study whether the financial analysts' concern to maintain good relationships with firms' managers in order to preserve their access to 'soft' qualitative information entice them to issue pessimistic or optimistic forecasts. We use a gravity model approach to firmsanalysts relationships and propose a measure of soft information. Our database contains the one-year ahead EPS forecasts issued by 4 648 analysts about 241 French firms (1997-2007). We find that a low (high) pair-effect is associated with a low (high) forecast error. This suggests that pessimism and optimism result from analysts' concern to preserve access to soft information released by managers.

Keywords: financial analysts; earnings forecasts; expectations; soft information; panel regression; gravity models.; analystes financiers; prévisions de bénéfices; anticipation; information privée; régression en panel; modèle de gravité. (search for similar items in EconPapers)
Date: 2011-12-01
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