Conflict in Whispers and Analyst Forecasts: Which One Should Be Your Guide?

31 Pages Posted: 28 Feb 2006  

Maretno A. Harjoto

Pepperdine University - Graziadio School of Business and Management

Janis Zaima

San Jose State University - Department of Accounting & Finance

Date Written: April 7, 2005

Abstract

This study examines the market reaction to conflicts that arise when analyst forecast errors are positive (negative) and whisper forecast errors are negative (positive). Results from a subsample, which represents firms with actual EPS that meet/beat the analyst forecast but not whisper, and regression analysis provide evidence that the market reaction to whispers is stronger than the market reaction to analysts. Compared to a portfolio that relies solely on either the analyst forecasts or whispers, a portfolio strategy that uses both information, as well as using whispers when the two conflict, results in higher abnormal returns.

Keywords: Whisper, Analyst forecast, earnings forecast errors, whisper number

JEL Classification: G14, M14, G29, M41

Suggested Citation

Harjoto, Maretno A. and Zaima, Janis, Conflict in Whispers and Analyst Forecasts: Which One Should Be Your Guide? (April 7, 2005). Available at SSRN: https://ssrn.com/abstract=886180 or http://dx.doi.org/10.2139/ssrn.886180

Maretno Agus Harjoto (Contact Author)

Pepperdine University - Graziadio School of Business and Management ( email )

Drescher Campus Suite 344
24255 Pacific Coast Highway
Malibu, CA 90045
United States
(310) 506-8542 (Phone)
(310) 506-4126 (Fax)

HOME PAGE: http://bschool.pepperdine.edu/faculty/default.php?faculty=maretno_harjoto

Janis Zaima

San Jose State University - Department of Accounting & Finance ( email )

One Washington Square
San Jose, CA 95192-0066
United States
408-924-3490 (Phone)
408-924-3463 (Fax)

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