The Efficiency of Earnings Forecast Pricing

42 Pages Posted: 31 Aug 2013

See all articles by Charles Hsu

Charles Hsu

Hong Kong University of Science & Technology

Qinglu Jin

Shanghai University of Finance and Economics

Date Written: July 31, 2013

Abstract

Prior research has suggested that the information content associated with analysts’ forecast revisions is not immediately incorporated into a firm’s stock price. We find that the apparent anomaly is concentrated in low-priced firms that receive favorable earnings revisions. Variables (such as analyst coverage and celebrity status) cannot reliably explain variations in price formations. Finally, we find that the magnitude of the post-forecast revision drift has decreased after 2002. Overall, our results suggest that the analysts’ forecast revisions anomaly can be explained by a combination of random statistical variations and transaction costs.

Keywords: Analyst forecast, Post-forecast revision drift, Market efficiency, Transaction costs

JEL Classification: G11, G14

Suggested Citation

Hsu, Charles and Jin, Qinglu, The Efficiency of Earnings Forecast Pricing (July 31, 2013). Journal of Accounting and Public Policy, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2311189

Charles Hsu (Contact Author)

Hong Kong University of Science & Technology ( email )

Hong Kong
Hong Kong
852-2358-7568 (Phone)
852-2358-1693 (Fax)

Qinglu Jin

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China
86-21-65908982 (Phone)

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