Abstract

http://ssrn.com/abstract=2151483
 


 



The Effects of Analysts’ Access to Management’s Private Information and the Precision of Publicly Available Information on Analyst Forecast Accuracy


Sami Keskek


University of Arkansas - Sam M. Walton College of Business

Linda A. Myers


University of Arkansas

Thomas C. Omer


University of Nebraska at Lincoln - School of Accountancy

Marjorie K. Shelley


University of Nebraska at Lincoln - School of Accountancy

August 2014


Abstract:     
We posit and find that the importance of analyst and forecast characteristics for analyst forecast accuracy varies with analysts’ access to management’s private information and with the precision of publicly available information. In particular, more experienced analysts and All-Star analysts do not maintain their superior forecast accuracy and analysts employed by large brokerage houses perform even worse than other analysts following the enactment of Regulation Fair Disclosure (Reg FD). In addition, we find a decrease in the importance of effort, the number of industries and firms followed, days elapsed since the last forecast, forecast horizon, and forecast boldness post-Reg FD. The decrease in the importance of most of these characteristics is greater when the precision of publicly available information is low. Our results suggest that the positive effects of experience, effort, brokerage house size, All-Star status for forecast accuracy pre-Reg FD were due to the information advantage these analysts enjoyed, rather than their ability to generate private information. In contrast, following the enactment of Reg FD, the importance of prior forecast accuracy increases and this increase is even greater when the precision of publicly available information is low. This suggests that prior forecast accuracy is related to analysts’ ability to generate private information. Because prior evidence suggests that investors consider analyst and forecast characteristics when they evaluate the relevance of analyst forecasts, our findings can help investors to better assess and use the information in analyst forecasts.

Number of Pages in PDF File: 45

Keywords: Analyst forecast errors, analyst disagreement, information uncertainty, private information

JEL Classification: M40, M41

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Date posted: September 25, 2012 ; Last revised: September 7, 2014

Suggested Citation

Keskek, Sami and Myers, Linda A. and Omer, Thomas C. and Shelley, Marjorie K., The Effects of Analysts’ Access to Management’s Private Information and the Precision of Publicly Available Information on Analyst Forecast Accuracy (August 2014). Available at SSRN: http://ssrn.com/abstract=2151483 or http://dx.doi.org/10.2139/ssrn.2151483

Contact Information

Sami Keskek
University of Arkansas - Sam M. Walton College of Business ( email )
Fayetteville, AR 72701
United States
Linda A. Myers (Contact Author)
University of Arkansas ( email )
Fayetteville, AR 72701
United States
Thomas C. Omer
University of Nebraska at Lincoln - School of Accountancy ( email )
307 College of Business Administration
Lincoln, NE 68588-0488
United States
Marjorie Shelley
University of Nebraska at Lincoln - School of Accountancy ( email )
307 College of Business Administration
Lincoln, NE 68588-0488
United States
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