Timeliness of Analysts’ Forecasts: The Information Content of Delayed Forecasts

57 Pages Posted: 17 Jan 2004 Last revised: 6 Feb 2018

See all articles by Pervin K. Shroff

Pervin K. Shroff

University of Minnesota - Twin Cities - Carlson School of Management

Ramgopal Venkataraman

University of Texas at Arlington

Baohua Xin

University of Toronto - Rotman School of Management

Date Written: January 8, 2014

Abstract

We examine how analysts whose forecasts lag those of timely analysts aid the price discovery process. We classify analysts as lead and follower analysts for a given firm based on the relative timeliness of their earnings forecasts over a two-year period. We find that news in forecasts of lead analysts has a higher price impact relative to that of follower analysts and this difference in impact cannot be explained by analyst reputation or experience. The price impact of follower analysts’ forecasts is significant, although it dissipates as follower analysts become less timely. Moreover, we find that the forecast issued by even the least timely analyst conveys incremental information to the market. The significant market impact of follower analysts arises mostly due to the private information conveyed by their forecast and partly because their forecasts incorporate public information including their predecessor’s forecast. While in general the price impact of the forecast component that mimics prior information is consistent with the post-revision drift documented by prior studies, we find that this impact is significant only when the follower analyst’s forecast confirms the information conveyed by the predecessor analyst. We also find that follower analysts issue more accurate forecasts than lead analysts who appear to trade off accuracy for timeliness. Overall, we conclude that the complementary roles of timely and late forecasters combine the merits of timely and accurate information and facilitate price discovery.

JEL Classification: G29, D82

Suggested Citation

Shroff, Pervin K. and Venkataraman, Ramgopal and Xin, Baohua, Timeliness of Analysts’ Forecasts: The Information Content of Delayed Forecasts (January 8, 2014). Contemporary Accounting Research, Vol. 31, No. 1, 2014. Available at SSRN: https://ssrn.com/abstract=487902 or http://dx.doi.org/10.2139/ssrn.487902

Pervin K. Shroff

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States
612-626-1570 (Fax)

Ramgopal Venkataraman (Contact Author)

University of Texas at Arlington ( email )

415 S West St Apt no 205
Arlington, TX 76019
United States

Baohua Xin

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

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