How are Analysts’ Forecasts Affected by High Uncertainty?

24 Pages Posted: 17 Apr 2018

See all articles by Dan Amiram

Dan Amiram

Tel Aviv University - Coller School of Management

Wayne R. Landsman

University of North Carolina Kenan-Flagler Business School

Edward Owens

University of Utah - David Eccles School of Business

Stephen Stubben

University of Utah

Multiple version iconThere are 2 versions of this paper

Date Written: March/April 2018

Abstract

This study examines whether key characteristics of analysts’ forecasts—timeliness, accuracy, and informativeness—change when investor demand for information is likely to be especially high, i.e., during periods of high uncertainty. Findings reveal that when uncertainty is high, analysts’ forecasts are more timely but less accurate. However, analysts’ forecasts are also more informative to the market, which is consistent with investors’ demand for timely information, even if it is less accurate. We observe these findings when market prices are increasing and decreasing, consistent with the findings resulting from uncertainty in general rather than just uncertainty associated with market declines. We also examine how timeliness, accuracy, and informativeness change in response to elevated levels of three sources of uncertainty—market, industry, and firm level. We predict and find that analysts are better able to deal with heightened industry uncertainty, as reflected by greater timeliness with no loss in forecast accuracy. In contrast, analysts have greater difficulty dealing with heightened market uncertainty, as both timeliness and forecast accuracy decline.

Keywords: earnings forecasts, financial analysts, uncertainty

Suggested Citation

Amiram, Dan and Landsman, Wayne R. and Owens, Edward and Stubben, Stephen, How are Analysts’ Forecasts Affected by High Uncertainty? (March/April 2018). Journal of Business Finance & Accounting, Vol. 45, Issue 3-4, pp. 295-318, 2018. Available at SSRN: https://ssrn.com/abstract=3163909 or http://dx.doi.org/10.1111/jbfa.12270

Dan Amiram (Contact Author)

Tel Aviv University - Coller School of Management ( email )

Tel Aviv
Israel

Wayne R. Landsman

University of North Carolina Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-3221 (Phone)
919-962-4727 (Fax)

Edward Owens

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States
8015815732 (Phone)

Stephen Stubben

University of Utah ( email )

1655 E. Campus Center
Salt Lake City, UT 84112
United States

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