Changes in Analysts' Information Around Earnings Announcements

Posted: 4 Nov 2002

See all articles by Orie E. Barron

Orie E. Barron

Pennsylvania State University

Donal Byard

City University of New York - Stan Ross Department of Accountancy

Oliver Kim

University of Maryland

Abstract

In this study we examine changes in the precision and the commonality of information contained in individual analysts' earnings forecasts, focusing on changes around earnings announcements. Using the empirical proxies suggested by the Barron et al. (1998) model that are based on the across-analyst correlation in forecast errors, we find that the commonality of information among active analysts significantly decreases around earnings announcements. We also find that the idiosyncratic information contained in these individual analysts' forecasts increases significantly immediately after earnings announcements, and this increase is more significant as more analysts revise their forecasts. These results are consistent with theories positing that an important role of accounting releases is to trigger the generation of idiosyncratic information by elite information processors such as financial analysts (Kim and Verrecchia 1994, 1997).

Keywords: common information, idiosyncratic information, earnings announcements, financial analysts, forecast aggregation

JEL Classification: G14, G24, G29, M41

Suggested Citation

Barron, Orie E. and Byard, Donal and Kim, Oliver, Changes in Analysts' Information Around Earnings Announcements. Available at SSRN: https://ssrn.com/abstract=316184

Orie E. Barron

Pennsylvania State University ( email )

University Park, PA 16802-3306
United States
814-863-3230 (Phone)
814-863-8393 (Fax)

Donal Byard (Contact Author)

City University of New York - Stan Ross Department of Accountancy ( email )

One Bernard Baruch Way, Box B12-225
New York, NY 10010
United States
646-312-3187 (Phone)
646-312-3161 (Fax)

Oliver Kim

University of Maryland ( email )

Rm.4449, Van Munching Hall
College Park, MD 20742-1815
United States
301-405-2243 (Phone)

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