Article2008

The Impact of Analysts' Forecast Errors and Forecast Revisions on Stock Prices

William H. Beaver · Bradford Cornell · Wayne R. Landsman · Stephen R. Stubben

48 citations0/0 files storedJournal of Business Finance &amp Accounting

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Auditing, Earnings Management, Governance Financial Markets and Investment Strategies Forecasting Techniques and Applications

Abstract

Abstract: We present a comprehensive analysis of the association between stock returns, quarterly earnings forecast errors, and quarter‐ahead and year‐ahead earnings forecast revisions. We find that forecast errors and the two forecast revisions have significant effects on stock prices, indicating each conveys information content. Findings also show that the fourth quarter differs from other quarters—the relative importance of the forecast error (quarter‐ahead forecast revision) is lower (higher). We also find a marked upward shift over time in the forecast error and forecast revision coefficients, consistent with the I/B/E/S database reflecting an improved quality of both earnings forecasts and actual earnings.

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References

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