Financial Analysts’ Response After Corporate Earnings Announcements and Forecast Quality

Abstract

We create an alternative, simpler definition of analyst forecast timeliness leaders based on their response after the corporate quarterly earnings announcements, examining if these analysts’ forecasts are superior in informativeness and accuracy. Our Earnings Announcement Date Leader classification method of leaders and followers is able to identify superior analysts who provide forecasts of higher quality in all three properties, timeliness, informativeness and accuracy, contrary to prior definitions of timeliness. Furthermore, prior forecast accuracy is positively associated to the forecast informativeness of both leaders and followers, being more important for the former. Our findings are important for investors and other market participants, because they can use the EAD Leader classification to identify superior analysts and, consequently, more informative and accurate forecasts.

Keywords: Earnings forecasts, earnings announcements, financial analysts, information quality

JEL Classification: G14, G17, G24