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Are Analysts' Forecasts Informative to the General Public?

Author

Listed:
  • 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)

  • Robert S. Hansen

    (A.B. Freeman School of Business, Tulane University, New Orleans, Louisiana 70118)

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.

Suggested Citation

  • Oya Altınkılıç & Vadim S. Balashov & Robert S. Hansen, 2013. "Are Analysts' Forecasts Informative to the General Public?," Management Science, INFORMS, vol. 59(11), pages 2550-2565, November.
    • Handle: RePEc:inm:ormnsc:v:59:y:2013:i:11:p:2550-2565
    DOI: 10.1287/mnsc.2013.1721
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    References listed on IDEAS

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