Analysts' use of range information provided in management earnings forecasts.
Tyler K. Jensen
Iowa State University - Department of Accounting and Finance
University of Utah - School of Accounting
August 27, 2015
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.
Number of Pages in PDF File: 53
Keywords: Management earnings forecasts, analyst range forecast accuracy
JEL Classification: G12, G14, M41
Date posted: September 1, 2012 ; Last revised: August 29, 2015