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Analyst Forecasting Ability and the Stock Price Reaction to Forecast Revisions

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Abstract

We empirically identifysuperior analysts using their past forecasting track record fora specific firm's earnings and demonstrate that subsequent forecastannouncements by these superior analysts have a greater impacton security prices than do the forecasts of other analysts. Wefind that, in our sample, the price effects of this firm-specificforecasting ability do not spill over to other firms followedby the same analyst. We also demonstrate that an analyst's forecastingability with respect to the earnings of a certain firm is relativelymore important in the period immediately preceding an earningsannouncement by that firm.

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Authors and Affiliations

  1. The Hong Kong University of Science & Technology, Hong Kong

    Chul W. Park

  2. Brigham Young University, USA

    Earl K. Stice

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  1. Chul W. Park
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  2. Earl K. Stice
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Park, C.W., Stice, E.K. Analyst Forecasting Ability and the Stock Price Reaction to Forecast Revisions. Review of Accounting Studies 5, 259–272 (2000). https://doi.org/10.1023/A:1009668711298

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  • DOI: https://doi.org/10.1023/A:1009668711298

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