Using Analysts' Forecasts to Measure Properties of Analysts' Information Environment

13 Pages Posted: 26 Jan 1999 Last revised: 29 Dec 2015

See all articles by Orie E. Barron

Orie E. Barron

Pennsylvania State University

Oliver Kim

University of Maryland

Steve C. Lim

Texas Christian University - M.J. Neeley School of Business

Douglas E. Stevens

Georgia State University - Robinson College of Business

Abstract

This paper presents a model that relates properties of the analysts' information environment to the properties of their forecasts. First, we express forecast dispersion and error in the mean forecast in terms of analyst uncertainty and consensus (that is, the degree to which analysts share a common belief). Second, we reverse the relations to show how uncertainty and consensus can be measured by combining forecast dispersion, error in the mean forecast, and the number of forecasts. Third, we show that the quality of common and private information available to analysts can be measured using these same observable variables. The relations we present are intuitive and easily applied in empirical studies.

JEL Classification: M41, G29

Suggested Citation

Barron, Orie E. and Kim, Oliver and Lim, Steve and Stevens, Douglas E., Using Analysts' Forecasts to Measure Properties of Analysts' Information Environment. The Accounting Review, October 1998, Robert H. Smith School Research Paper No. RHS 143828, Available at SSRN: https://ssrn.com/abstract=143828

Orie E. Barron (Contact Author)

Pennsylvania State University ( email )

University Park, PA 16802-3306
United States
814-863-3230 (Phone)
814-863-8393 (Fax)

Oliver Kim

University of Maryland ( email )

Rm.4449, Van Munching Hall
College Park, MD 20742-1815
United States
301-405-2243 (Phone)

Steve Lim

Texas Christian University - M.J. Neeley School of Business ( email )

2900 Lubbock Street
Fort Worth, TX 76129
United States
817-257-7536 (Phone)

Douglas E. Stevens

Georgia State University - Robinson College of Business ( email )

P.O. Box 4050
Atlanta, GA 30303-3083
United States
404-413-7212 (Phone)
404-413-7203 (Fax)

HOME PAGE: http://robinson.gsu.edu/profile/douglas-e-stevens/

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