Crowdsourced Earnings Forecasts: Implications for Analyst Forecast Timing and Market Efficiency

57 Pages Posted: 24 Oct 2017 Last revised: 25 Mar 2018

See all articles by Rajiv D. Banker

Rajiv D. Banker

Temple University - Department of Accounting

Joshua Khavis

Temple University - Department of Accounting

Han-Up Park

University of Saskatchewan - Edwards School of Business

Date Written: October 23, 2017

Abstract

We investigate how the arrival of Estimize, a provider of crowdsourced earnings forecasts, impacts IBES analysts’ forecast timeliness and facilitates market efficiency. We find that IBES analysts become more responsive to earnings announcements and start issuing their quarterly forecasts earlier when faced with competition from Estimize. The Estimize effect is strongest when Estimize quarterly forecasts pose a direct competitive threat to IBES — when Estimize forecasts are present within 3 days of earnings announcements (i.e., are issued early). Specifically, IBES analysts become more responsive to earnings announcements post Estimize, and issue more than 9% of their one-quarter-ahead forecasts earlier in the quarter when early Estimize coverage is present in the prior quarter. We also document that this increased responsiveness of IBES analysts facilitates market efficiency as it results in greater immediate market reaction to earnings surprises and mostly eliminates the post-earnings-announcement drift.

Keywords: crowdsourcing, analyst forecasts, post-earnings-announcement drift

Suggested Citation

Banker, Rajiv D. and Khavis, Joshua and Park, Han-Up, Crowdsourced Earnings Forecasts: Implications for Analyst Forecast Timing and Market Efficiency (October 23, 2017). Fox School of Business Research Paper No. 17-036; 2018 Canadian Academic Accounting Association (CAAA) Annual Conference. Available at SSRN: https://ssrn.com/abstract=3057388 or http://dx.doi.org/10.2139/ssrn.3057388

Rajiv D. Banker

Temple University - Department of Accounting ( email )

Philadelphia, PA 19122
United States

Joshua Khavis (Contact Author)

Temple University - Department of Accounting ( email )

Philadelphia, PA 19122
United States

Han-Up Park

University of Saskatchewan - Edwards School of Business ( email )

Saskatchewan
Canada

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