Investor Reaction to Celebrity Analysts: The Case of Earnings Forecast Revisions

51 Pages Posted: 21 Jul 2005

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We examine the effects of analysts' celebrity on investor reaction to earnings forecast revisions. We measure celebrity as the quantity of media coverage analysts receive in sources included in the Dow Jones Interactive database, and find that media coverage is positively related to investor reaction to forecast revisions. The effect of celebrity on the reaction to forecast revisions remains significant after controlling for forecast performance variables examined in prior studies (ex post forecast accuracy, ex ante accuracy, award status, and other variables shown to be related to forecast accuracy). While these results are consistent with the familiarity of the analyst's name affecting the market reaction, we cannot rule out that our measure of celebrity is correlated with error in the performance measures we examine and/or correlated with other unexamined dimensions of forecast performance. A content analysis of a random subsample of the media coverage of our sample analysts suggests that our findings likely are not due to the increased availability of forecast revisions. Finally, an investigation of the excess returns around the quarterly earnings announcement date suggests that market participants react too strongly to forecast revisions issued by analysts with high levels of media coverage. Taken together, these findings suggest that an analyst's level of media coverage can affect the initial market reaction to his forecast revisions.

Keywords: Analyst forecast revisions, investor reaction, celebrity, media coverage, forecast

JEL Classification: G29, G14, M41

Suggested Citation

Bonner, Sarah E. and Hugon, Artur and Walther, Beverly R., Investor Reaction to Celebrity Analysts: The Case of Earnings Forecast Revisions. AAA 2006 Financial Accounting and Reporting Section (FARS) Meeting; Journal of Accounting Research, Forthcoming. Available at SSRN:

Sarah E. Bonner

University of Southern California ( email )

Marshall School of Business
Los Angeles, CA 90089-0441
United States
213-740-5025 (Phone)
213-747-2815 (Fax)

Artur Hugon

Arizona State University (ASU) ( email )

Farmer Building 440G PO Box 872011
Tempe, AZ 85287
United States

Beverly R. Walther (Contact Author)

Northwestern University - Department of Accounting Information & Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
847-467-1595 (Phone)
847-467-1202 (Fax)

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