Information Content of Equity Analyst Reports

55 Pages Posted: 15 Feb 2004 Last revised: 28 Jul 2008

See all articles by Paul Asquith

Paul Asquith

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

Michael B. Mikhail

University of Illinois at Chicago - College of Business Administration

Andrea S. Au

State Street Corporation

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Abstract

We catalog the complete contents of All-American Analyst reports and examine the market reaction to their release. Including the justifications supporting an analyst's opinion reduces, and in some models eliminates, the significance of earnings forecasts and recommendation revisions. Analysts both provide new information and interpret previously released information. The information in a report is most important for downgrades; target prices and the analyst's justifications are the only significant elements for reiterations. No correlation exists between valuation methodology and either analyst accuracy or the market's reaction to a report. Our adjusted R2s are much larger than those of studies using only summary measures.

Keywords: Stock recommendations, Price targets, Earnings forecasts, Security analysts

JEL Classification: G11, G12, G14, G24, G29, M41

Suggested Citation

Asquith, Paul and Mikhail, Michael B. and Au, Andrea S., Information Content of Equity Analyst Reports. Journal of Financial Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=501522

Paul Asquith

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

Michael B. Mikhail (Contact Author)

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

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

Andrea S. Au

State Street Corporation ( email )

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

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