Information Content of Equity Analyst Reports

38 Pages Posted: 5 Oct 2002

See all articles by Paul Asquith

Paul Asquith

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA); National Bureau of Economic Research (NBER)

Andrea S. Au

State Street Corporation

Michael B. Mikhail

University of Illinois at Chicago - College of Business Administration

Multiple version iconThere are 3 versions of this paper

Date Written: October 2002

Abstract

This paper investigates the market reaction to the information released in security analyst reports. It shows that the market reacts significantly and positively to changes in recommendation levels, earnings forecasts, and price targets. While changes in price targets and earnings forecasts both provide information to the market, revisions in price targets have a larger and more significant impact than comparable revisions in earnings forecasts. The text of the report is also a significant source of information as it provides the justifications supporting an analyst's summary opinion. When all of this information is considered simultaneously, some of it, notably the earnings forecasts, is subsumed. The results further show that analysts correctly predict price targets slightly over 50% of the time. Finally, the valuation methodology used does not seem to be correlated with either the market's reaction or the analyst's accuracy.

Suggested Citation

Asquith, Paul and Au, Andrea S. and Mikhail, Michael B., Information Content of Equity Analyst Reports (October 2002). NBER Working Paper No. w9246. Available at SSRN: https://ssrn.com/abstract=336362

Paul Asquith (Contact Author)

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA) ( email )

77 Massachusetts Avenue
Cambridge, MA 02139-4307
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Andrea S. Au

State Street Corporation ( email )

State Street Financial Center
1 Lincoln Street
Boston, MA 02111
United States

Michael B. Mikhail

University of Illinois at Chicago - College of Business Administration ( email )

601 South Morgan Street
11th Floor
Chicago, IL 60607
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
88
Abstract Views
1,899
rank
3,223
PlumX Metrics