The Relationship Between Analysts’ Forecast Errors and Long-Term and Short-Term Stock Price

• Main Authors: Wen-Chun Lin, 林玟君
• Other Authors: Tsai-Yen Chung
• Format: Others
• Language: zh-TW
• Published: 2002
• Online Access: http://ndltd.ncl.edu.tw/handle/34761703579654512824

碩士 === 元智大學 === 管理研究所 === 90 === Sell-side analysts forecasts are used as an input to investment decisions. Prior studies indicate that analysts are financially motivated to provide biased earnings forecasts. This study examines market reactions to analysts forecasts and infers whether analysts forecasts provide information about firms’ economic earnings and thus their economic values rather than simply provide predictions of accounting earnings. The results indicate the following: (1) Using accounting earnings as the benchmark, consensus forecasts are more optimistic than pessimistic, in addition, the degree of optimism increases as earnings announcement draws nearer; (2) Both the short-run and long-run market reactions are positively associated with analysts forecast errors; (3) Cumulative abnormal returns surrounding earnings announcements are positively associated with analysts forecast errors. Asymmetric short-run market reactions indicates that analysts provide information about firms’ accounting earnings rather than merely predict economic earnings; and (4) All one-, two- and three-year long-run returns are positively associated with analysts forecast errors, indicating that analysts forecasts provide information about firms’ accounting earnings rather than provide predictions of economic earnings. In addition, the delayed market reactions to analysts forecasts point to the possibility of market inefficiency. However, market reactions to optimistic earnings forecasts are not much different from zero, indicating that optimistic forecasts are noisier due to the incentive problems noted in the previous studies.