Analysts' use of range information provided in management earnings forecasts.

53 Pages Posted: 1 Sep 2012 Last revised: 29 Aug 2015

Tyler K. Jensen

Iowa State University - Department of Accounting and Finance

Marlene Plumlee

University of Utah - School of Accounting

Date Written: August 27, 2015

Abstract

This paper examines analyst responses to management forecasts issued as a range, a large and growing proportion of those forecasts. We find that information conveyed through the four parameters of the management forecasts - the upper and lower bounds, the width, and the midpoint - explains changes in consensus analysts’ forecasts and changes in the range of those forecasts for the current and future year. In addition, we provide initial evidence that information gleaned from each of these parameters is systematically related to reported earnings and that relying on this information improves analyst accuracy. In sum, we find that analysts react to information conveyed by all four parameters of a management range forecast and that these metrics are informative in large part because they provide information related to future reported earnings.

Keywords: Management earnings forecasts, analyst range forecast accuracy

JEL Classification: G12, G14, M41

Suggested Citation

Jensen, Tyler K. and Plumlee, Marlene, Analysts' use of range information provided in management earnings forecasts. (August 27, 2015). Available at SSRN: https://ssrn.com/abstract=2138898 or http://dx.doi.org/10.2139/ssrn.2138898

Tyler K. Jensen

Iowa State University - Department of Accounting and Finance ( email )

College of Business
Ames, IA 50011-2063
United States

Marlene A. Plumlee (Contact Author)

University of Utah - School of Accounting ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

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