Publications
Publications
- February 2011
- Journal of Accounting & Economics
Understanding Analysts’ Use and Under-use of Stock Returns and Other Analysts’ Forecasts when Forecasting Earnings
By: Michael B. Clement, Jeffrey Hales and Yanfeng Xue
Abstract
We investigate analysts' use of stock returns and other analysts' forecast revisions in revising their own forecasts after an earnings announcement. We find that analysts respond more strongly to these signals when the signals are more informative about future earnings changes. Although analysts underreact to these signals on average, we find that analysts who are most sensitive to signal informativeness achieve superior forecast accuracy relative to their peers and have a greater influence on the market. The results suggest that the ability to extract information from the actions of others serves as one source of analyst expertise.
Keywords
Learning; Forecasting and Prediction; Performance Evaluation; Knowledge Use and Leverage; Financial Services Industry
Citation
Clement, Michael B., Jeffrey Hales, and Yanfeng Xue. "Understanding Analysts’ Use and Under-use of Stock Returns and Other Analysts’ Forecasts when Forecasting Earnings." Journal of Accounting & Economics 51, nos. 1-2 (February 2011): 279–299.