EARNINGS EXPECTATIONS, FIRM SIZE, AND THE INFORMATIVENESS OF STOCK PRICES

EARNINGS EXPECTATIONS, FIRM SIZE, AND THE INFORMATIVENESS OF STOCK PRICES The notion that prices impound a wide array of information, including market expectations, has led to earnings forecast models conditioned on prices. Yet, presumably, analysts’ forecasts capture both public information and certain private information not previously impounded in prices. Accordingly, price‐based models are seemingly an inefficient, and less effective, source of expecta‐tions. This article investigates this hypothesis using financial analysts', price‐based, and naive forecasts. Results indicate that analysts’ forecasts (1) are at least as accurate as price‐based and naive models, and (2) yield better expectations for market tests relating returns and earnings. These inferences are robust across different information environments. The evidence suggests that analysts either possess private information or are more effective information processors, or both. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Business Finance & Accounting Wiley

EARNINGS EXPECTATIONS, FIRM SIZE, AND THE INFORMATIVENESS OF STOCK PRICES

Loading next page...
 
/lp/wiley/earnings-expectations-firm-size-and-the-informativeness-of-stock-D02H0qr02r
Publisher
Wiley
Copyright
Copyright © 1994 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0306-686X
eISSN
1468-5957
D.O.I.
10.1111/j.1468-5957.1994.tb00359.x
Publisher site
See Article on Publisher Site

Abstract

The notion that prices impound a wide array of information, including market expectations, has led to earnings forecast models conditioned on prices. Yet, presumably, analysts’ forecasts capture both public information and certain private information not previously impounded in prices. Accordingly, price‐based models are seemingly an inefficient, and less effective, source of expecta‐tions. This article investigates this hypothesis using financial analysts', price‐based, and naive forecasts. Results indicate that analysts’ forecasts (1) are at least as accurate as price‐based and naive models, and (2) yield better expectations for market tests relating returns and earnings. These inferences are robust across different information environments. The evidence suggests that analysts either possess private information or are more effective information processors, or both.

Journal

Journal of Business Finance & AccountingWiley

Published: Oct 1, 1994

References

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create folders to
organize your research

Export folders, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off