| Summary: | 碩士 === 國立交通大學 === 財務金融研究所 === 101 === Many studies reach the same conclusion that analysts are over-optimistic when they forecast earnings; however, there are inconsistent results with regards to whether analysts overreact or underreact to prior information. In addition, the forecasts of analysts are biased by different sources of information. Some researchers observe the biased types of earnings forecasts in Taiwan market. On the other hand, regarding the announcement of analysts’ reports as an event, some researchers investigate whether there are abnormal returns. Therefore, based on Easterwood &;Nutt(1999), this study examines the biased types of earnings forecasts for analysts in Taiwan. Specifically, this study first determines the biased types of earnings forecasts for analysts who face the positive or negative change in prior EPSs of the target firm. We then calculate the cumulative abnormal return after the release of analysts’ reports..
The empirical results indicate that analysts are overoptimistic and overreact to the information of change in prior EPSs when forecasting annual earnings. Moreover, we observe the cumulative abnormal returns (CARs) from the reports of analysts who overreact to the prior information. The results show that when the change in prior EPSs is positive (good news), the CAR will be negative. Conversely, the CAR will be positive when the change in prior EPSs is negative (bad news).
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