Do Stock Prices Influence Analysts’ Earnings Forecasts?
44 Pages Posted: 4 Aug 2010
Date Written: July 2010
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: Suggested Citation