Analysts' forecasts as proxies for investor beliefs in empirical research

Analysts' forecasts as proxies for investor beliefs in empirical research We analyze how analysts' forecasts relate to investor beliefs and describe the implications of these relations for price and volume reactions to earnings surprises. We show that dispersion among forecasts does not fully capture investor uncertainty. We also show how the relations between market reactions and forecast properties differ under the alternative assumptions of exogenous and endogenous private information acquisition. Finally, the analysis suggests refined tests for volume reactions at the time of an announcement. Our results indicate that the model is useful for understanding and interpreting empirical work and developing empirical tests of market reactions to announcements. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting and Economics Elsevier

Analysts' forecasts as proxies for investor beliefs in empirical research

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Publisher
Elsevier
Copyright
Copyright © 1995 Elsevier Ltd
ISSN
0165-4101
D.O.I.
10.1016/0165-4101(94)00392-I
Publisher site
See Article on Publisher Site

Abstract

We analyze how analysts' forecasts relate to investor beliefs and describe the implications of these relations for price and volume reactions to earnings surprises. We show that dispersion among forecasts does not fully capture investor uncertainty. We also show how the relations between market reactions and forecast properties differ under the alternative assumptions of exogenous and endogenous private information acquisition. Finally, the analysis suggests refined tests for volume reactions at the time of an announcement. Our results indicate that the model is useful for understanding and interpreting empirical work and developing empirical tests of market reactions to announcements.

Journal

Journal of Accounting and EconomicsElsevier

Published: Jul 1, 1995

References

  • Dispersion of financial analysts' earnings forecasts and the (option model) implied standard deviations of stock returns
    Ajinkya, B.; Gift, M.
  • Dispersion of expectations and trading volume
    Comiskey, E.; Walking, R.; Weeks, M.

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