Information Interpretation or Information Discovery: Which Role of Analysts Do Investors Value More?

Posted: 8 Feb 2012

See all articles by Joshua Livnat

Joshua Livnat

New York University; Prudential Financial - Quantitative Management Associates

Yuan Zhang

University of Texas at Dallas

Multiple version iconThere are 2 versions of this paper

Date Written: February 8, 2012

Abstract

This study provides evidence that a significant percentage of analyst forecast revisions are issued promptly after a broad set of corporate public disclosures and that investors perceive these prompt revisions as more valuable than non-prompt revisions. These results hold for all revisions, revisions outside of the earnings announcement window, or revisions in weeks preceding the earnings announcements, and are also robust to various sensitivity tests. Investors particularly value analysts’ prompt interpretation of earnings announcements, Form 8-K filings, or certain qualitative news. To the extent that prompt revisions are more likely to reflect analysts’ information interpretation role, our results suggest that investors value more highly analysts’ ability to interpret public disclosure, especially less structured or non-financial disclosures, than their ability for information discovery.

Suggested Citation

Livnat, Joshua and Zhang, Yuan, Information Interpretation or Information Discovery: Which Role of Analysts Do Investors Value More? (February 8, 2012). Review of Accounting Studies, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2001428

Joshua Livnat

New York University ( email )

44 West 4th Street, Suite 10-76
Stern School of Business
New York, NY 10012-1118
United States
212-998-0022 (Phone)
212-995-4004 (Fax)

Prudential Financial - Quantitative Management Associates ( email )

2 Gateway Center
6th Fl.
Newark, NJ 07102
United States

Yuan Zhang (Contact Author)

University of Texas at Dallas ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

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