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Other comprehensive income, its components, and analysts’ forecasts

Author

Listed:
  • Joshua Anderson

    (California Polytechnic State University)

  • Yiting Cao

    (California State University Los Angeles)

  • Edward J. Riedl

    (Boston University)

  • Scarlett Xiaotong Song

    (University of New Hampshire)

Abstract

This paper examines how analysts incorporate other comprehensive income (OCI) and its components into their earnings forecasts. We first document that analysts’ 1-year-ahead earnings forecasts are associated with OCI and OCI components having predictive ability; this suggests analysts (at least partially) incorporate this information into their forecasting. We then show that analysts are neither complete nor timely in incorporating OCI information into their forecasts, as several OCI components remain associated with analysts’ forecast errors. Further, we document that higher uncertainty in firm performance exacerbates analysts’ underreaction, evidencing a friction to full incorporation of OCI-related information. Finally, as evidence of where and when analysts derive OCI-related information, we document that analysts’ forecast revisions correlate with the release of firms’ 10-Ks and early 10-Qs (i.e., quarters one and two but not three).

Suggested Citation

  • Joshua Anderson & Yiting Cao & Edward J. Riedl & Scarlett Xiaotong Song, 2023. "Other comprehensive income, its components, and analysts’ forecasts," Review of Accounting Studies, Springer, vol. 28(2), pages 792-826, June.
    • Handle: RePEc:spr:reaccs:v:28:y:2023:i:2:d:10.1007_s11142-021-09656-y
    DOI: 10.1007/s11142-021-09656-y
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    References listed on IDEAS

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    Cited by:

    1. Black, Dirk & Neururer, Thaddeus, 2024. "Do analysts provide information about other comprehensive income in book value forecasts for financial firms?," Advances in accounting, Elsevier, vol. 64(C).

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