A new approach to predicting analyst forecast errors: Do investors overweight analyst forecasts?

• 成果类型: Article
• 署名作者: So, Eric C.
• 署名单位: Massachusetts Institute of Technology (MIT)
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2013.02.002
• 发表日期: 2013
• 页码: 615-640
• 关键词: Analysts; Forecast errors; earnings; market efficiency

摘要

I provide evidence that investors overweight analyst forecasts by demonstrating that prices do not fully reflect predictable components of analyst errors, which conflicts with conclusions in prior research. I highlight estimation bias in traditional approaches and develop a new approach that reduces this bias. I estimate characteristic forecasts that map current firm characteristics into forecasts of future earnings. Contrasting characteristic and analyst forecasts predicts analyst forecast errors and revisions. I find abnormal returns to strategies that sort firms by predicted forecast errors, consistent with investors overweighting analyst forecasts and predictable biases in analyst forecasts influencing the information content of prices. (C) 2013 Elsevier B.V. All rights reserved.