Consensus? An Examination of Differences in Earnings Information Across Forecast Data Providers

Abstract

We compare the earnings information produced by the five largest forecast data providers (FDPs) – Bloomberg, Capital IQ, FactSet, I/B/E/S, and Zacks – and observe substantial differences across FDPs in both forecasted and actual street earnings values, and thus the earnings surprise, for the same firm-quarter. We provide evidence that differences in the earnings surprise across FDPs for the same firm-quarter (hereafter, “FDP differences”) have implications for the efficiency of the price response to earnings, equity market liquidity, and volatility. We also find that, when faced with material FDP differences, investors rely more heavily upon earnings information with higher expected quality and salience. On average, relative to the other FDPs, I/B/E/S ranks highly in our measures of quality and salience and investors rely more heavily upon its earnings information, validating its use as a representative FDP in academic research. Taken together, our results are consistent with FDPs pursuing differentiated information production strategies that generate capital market frictions in situations when these strategies lead to material FDP differences.

JEL Classification: G14, M40, M41