Changes in Analysts' Information around Earnings Announcements
Orie E. Barron
Pennsylvania State University
City University of New York (CUNY) - Stan Ross Department of Accountancy
University of Maryland
The Accounting Review, October 2002
In this study we examine changes in the precision and the commonality of information contained in individual analysts' earnings forecasts, focusing on changes around earnings announcements. Using the empirical proxies suggested by the Barron et al. (1998) model that are based on the across-analyst correlation in forecast errors, we find that the commonality of information among active analysts significantly decreases around earnings announcements. We also find that the idiosyncratic information contained in these individual analysts' forecasts increases significantly immediately after earnings announcements, and this increase is more significant as more analysts revise their forecasts. These results are consistent with theories positing that an important role of accounting releases is to trigger the generation of idiosyncratic information by elite information processors such as financial analysts (Kim and Verrecchia 1994, 1997).
Keywords: common information, idiosyncratic information, earnings announcements, financial analysts, forecast aggregation
JEL Classification: G14, G24, G29, M41Accepted Paper Series
Date posted: November 4, 2002
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