The Impact of Analysts' Forecast Errors and Forecast Revisions on Stock Prices |
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| Authors: | William Beaver Bradford Cornell Wayne R. Landsman Stephen R. Stubben |
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| Affiliation: | The first author is from the Graduate School of Business, Stanford University, CA. The second author is from the California Institute of Technology, Pasadena, CA. The third and fourth authors are from the Kenan-Flagler Business School, The University of North Carolina at Chapel Hill, NC, USA. |
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| 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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| Keywords: | earnings surprise forecast errors forecast revisions stock returns fourth quarter |
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