The Impact of Analysts' Forecast Errors and Forecast Revisions on Stock Prices

32 Pages Posted: 18 Jun 2008

See all articles by William H. Beaver

William H. Beaver

Stanford University

Bradford Cornell

Anderson Graduate School of Management, UCLA

Wayne R. Landsman

University of North Carolina Kenan-Flagler Business School

Stephen Stubben

University of Utah

Abstract

We present a comprehensive analysis of the association between stock returns, quarterly earnings forecast errors, and quarter-ahead and year-ahead earnings forecast revisions. We find that forecast errors and the two forecast revisions have significant effects on stock prices, indicating each conveys information content. Findings also show that the fourth quarter differs from other quartersthe relative importance of the forecast error (quarter-ahead forecast revision) is lower (higher). We also find a marked upward shift over time in the forecast error and forecast revision coefficients, consistent with the I/B/E/S database reflecting an improved quality of both earnings forecasts and actual earnings.

Suggested Citation

Beaver, William H. and Cornell, Bradford and Landsman, Wayne R. and Stubben, Stephen, The Impact of Analysts' Forecast Errors and Forecast Revisions on Stock Prices. Journal of Business Finance & Accounting, Vol. 35, Issue 5-6, pp. 709-740, June/July 2008, Available at SSRN: https://ssrn.com/abstract=1147284 or http://dx.doi.org/10.1111/j.1468-5957.2008.02079.x

William H. Beaver

Stanford University ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-723-4409 (Phone)
650-725-6152 (Fax)

Bradford Cornell

Anderson Graduate School of Management, UCLA ( email )

Pasadena, CA 91125
United States
626 833-9978 (Phone)

Wayne R. Landsman

University of North Carolina Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-3221 (Phone)
919-962-4727 (Fax)

Stephen Stubben

University of Utah ( email )

1655 E. Campus Center
Salt Lake City, UT 84112
United States

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