Do Stock Prices Influence Analysts’ Earnings Forecasts?

44 Pages Posted: 4 Aug 2010

See all articles by Jeffrey S. Miller

Jeffrey S. Miller

University of Notre Dame - Department of Accountancy

Lisa M. Sedor

DePaul University

Date Written: July 2010

Abstract

This paper presents results from an experiment and follow-up survey examining whether stock prices influence analysts’ earnings forecasts. In our experiment, prices influence analysts’ forecasts when uncertainty about future earnings is high, but not when uncertainty is low. Additional analyses indicate that this effect is mediated partially by analysts’ confidence in their forecasts and appears to be unintentional. Evidence from our follow-up survey, however, indicates that some professional analysts intentionally incorporate stock price information into their earnings forecasts. Taken together, our evidence suggests that the association between prior security returns and analysts’ earnings forecasts documented in prior research is due, at least in part, to professional analysts intentionally and unintentionally incorporating stock price information into their earnings forecasts.

JEL Classification: M41, G12

Suggested Citation

Miller, Jeffrey S. and Sedor, Lisa M., Do Stock Prices Influence Analysts’ Earnings Forecasts? (July 2010). Available at SSRN: https://ssrn.com/abstract=1653134 or http://dx.doi.org/10.2139/ssrn.1653134

Jeffrey S. Miller (Contact Author)

University of Notre Dame - Department of Accountancy ( email )

Mendoza College of Business
Notre Dame, IN 46556-5646
United States

Lisa M. Sedor

DePaul University ( email )

Chicago, IL 60604
United States

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