Abstract

http://ssrn.com/abstract=1270147
 
 

References (56)



 
 

Citations (6)



 


 



The Use of Earnings Forecasts in Stock Recommendations: Are Accurate Analysts More Consistent?


Andreas Simon


Pepperdine University - Graziadio School of Business and Management

Asher Curtis


University of Washington

September 1, 2010

Journal of Business Finance & Accounting, Forthcoming

Abstract:     
We examine how analysts’ incentives to build their reputation through accurate forecasting changes the relative association between analyst recommendations and rigorous valuation models versus valuation heuristics. Controlling for the firm-specific difficulty of valuation, we show that the recommendations of the most accurate forecasters within each industry have a significantly higher correlation with rigorous valuation models and a significantly lower correlation with valuation heuristics than their less accurate peers. Our results are robust to potentially confounding firm-specific effects using a within-firm sample design, a changes analysis, and for short-term, long-term and combined measures of forecast accuracy. Consistent with reputation building, we find that the recommendations of “All-Star” analysts and accurate forecasters have similar associations on rigorous and heuristic valuation approaches. Our results are consistent with the incentive to build a good reputation mitigating the influence of factors other than identifying mispriced securities, using fundamental analysis, on stock recommendations.

Number of Pages in PDF File: 42

Keywords: Forecast accuracy, Fundamental valuation, Stock recommendations, Analyst reputation

JEL Classification: G12, G14, G29, M41

Accepted Paper Series


Download This Paper

Date posted: September 18, 2008 ; Last revised: September 13, 2010

Suggested Citation

Simon, Andreas and Curtis, Asher, The Use of Earnings Forecasts in Stock Recommendations: Are Accurate Analysts More Consistent? (September 1, 2010). Journal of Business Finance & Accounting, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1270147

Contact Information

Andreas Simon (Contact Author)
Pepperdine University - Graziadio School of Business and Management ( email )
Malibu, CA
United States
Asher Curtis
University of Washington ( email )
NE Colombia Rd.
Seattle, WA 98195
United States
Feedback to SSRN


Paper statistics
Abstract Views: 1,297
Downloads: 231
Download Rank: 74,172
References:  56
Citations:  6

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo4 in 0.391 seconds