Analyst ability and research effort: non-EPS forecast provision as a research quality signal

• 成果类型: Article
• 署名作者: Pope, Peter F.; Wang, Tong
• 署名单位: Bocconi University; Bocconi University; Barclays
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-023-09791-8
• 发表日期: 2023
• 页码: 1263-1315
• 关键词: EARNINGS FORECASTS; information-content; empirical-analysis; career concerns; performance; accuracy; recommendations; experience; investors; matter

摘要

The range of non-EPS forecast types provided by individual analysts to I/B/E/S has increased dramatically over time but varies considerably across firms. We propose that in providing a broader range of forecast types, analysts can signal superior research ability and research effort. Consistent with this hypothesis, we document positive associations between the number of forecast types (NFT) an analyst provides and common proxies for research quality, including earnings forecast accuracy, price target accuracy, stock recommendation profitability, market reactions to stock recommendation revisions, and analyst career outcomes. The effects of NFT are incremental to other quality proxies used in the literature and are distinct from the issuance of specific non-EPS forecast types studied previously (e.g., cash flow forecasts). We demonstrate the information value of NFT to investors by examining the out-of-sample performance of portfolios formed conditional on NFT and exploiting revisions in consensus earnings forecasts and individual analysts' stock recommendations. We conclude that the number of forecast types an analyst provides for a firm is a readily available proxy for the quality of her research.