Analysts' Earnings Forecast Revision Around Industry Member Firms' Earnings Announcement

Posted: 25 May 2000 Last revised: 29 Jan 2014

See all articles by Steve C. Lim

Steve C. Lim

Texas Christian University - M.J. Neeley School of Business

Byung T. Ro

Purdue University - Krannert School of Management

Youngin Pyo

Kangwon National University

Date Written: January 1, 2000

Abstract

This study examines: (1) whether earnings announcements by industry member firms trigger analysts to revise their forecasts of other member firms' soon-to-be-released contemporaneous earnings and (2) how the revision is related to forecast bias and the announcing firms' earnings news. The forecast revision on a nonannouncing firm is measured as the change in analyst forecasts of its quarterly earnings immediately before and after an announcing firm's earnings release date. We find that analysts revise forecasts on the nonannouncing sample firms consistently in direction with the signs of the announcing firms' unexpected earnings. The evidence, however, is pronounced only for downward, not upward, revisions and for quarters in which the announcers fail to meet analysts' expectations. The findings suggest that a member firm's earnings announcement is a timely source of information for analysts to revise their preceding forecasts of other member firms' contemporaneous earnings. They also suggest that the forecast revision is not symmetric in direction and varies with announcing firms' actual earnings news.

JEL Classification: M41, G14, G29

Suggested Citation

Lim, Steve and Ro, Byung T. and Pyo, Youngin, Analysts' Earnings Forecast Revision Around Industry Member Firms' Earnings Announcement (January 1, 2000). Available at SSRN: https://ssrn.com/abstract=221330

Steve Lim

Texas Christian University - M.J. Neeley School of Business ( email )

2900 Lubbock Street
Fort Worth, TX 76129
United States
817-257-7536 (Phone)

Byung T. Ro (Contact Author)

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States
765-494-4512 (Phone)
765-494-9658 (Fax)

Youngin Pyo

Kangwon National University

School of Management
Chunchon
KOREA

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