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The Value of Crowdsourced Earnings Forecasts

48 Pages Posted: 30 Sep 2013 Last revised: 24 Mar 2016

Russell Jame

University of Kentucky

Rick Johnston

University of Alabama at Birmingham - Department of Accounting and Information Systems

Stanimir Markov

Southern Methodist University (SMU) - Edwin L. Cox School of Business

Michael C Wolfe

Virginia Tech

Multiple version iconThere are 2 versions of this paper

Date Written: March 23, 2016

Abstract

Crowdsourcing — when a task normally performed by employees is outsourced to a large network of people via an open call — is making inroads into the investment research industry. We shed light on this new phenomenon by examining the value of crowdsourced earnings forecasts. Our sample includes 51,012 forecasts provided by Estimize, an open platform that solicits and reports forecasts from over 3,000 contributors. We find that Estimize forecasts are incrementally useful in forecasting earnings and measuring the market’s expectations of earnings. Our results are stronger when the number of Estimize contributors is larger, consistent with the benefits of crowdsourcing increasing with the size of the crowd. Finally, Estimize consensus revisions generate significant two-day size-adjusted returns. The combined evidence suggests that crowdsourced forecasts are a useful, supplementary source of information in capital markets.

Keywords: Analyst, Forecast, Earnings Response Coefficients, Crowdsourcing

JEL Classification: G28, G29, M41, M43

Suggested Citation

Jame, Russell and Johnston, Rick and Markov, Stanimir and Wolfe, Michael C, The Value of Crowdsourced Earnings Forecasts (March 23, 2016). Available at SSRN: https://ssrn.com/abstract=2333671 or http://dx.doi.org/10.2139/ssrn.2333671

Russell Jame

University of Kentucky ( email )

Gatton College of Businesss & Economics
Lexington, KY 40506
United States

HOME PAGE: http://russelljame.com

Rick M. Johnston (Contact Author)

University of Alabama at Birmingham - Department of Accounting and Information Systems ( email )

Birmingham, AL 35294
United States

Stanimir Markov

Southern Methodist University (SMU) - Edwin L. Cox School of Business ( email )

P.O. Box 750333
Dallas, TX 75275-0333
United States

Michael C. Wolfe

Virginia Tech ( email )

Pamplin College of Business
Department of Accounting and Information Systems
Blacksburg, VA 24061
United States
540-231-9170 (Phone)
540-231-2511 (Fax)

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