Conflict in Whispers and Analyst Forecasts: Which One Should Be Your Guide?
Maretno A. Harjoto
Pepperdine University - Graziadio School of Business and Management
San Jose State University - Department of Accounting & Finance
April 7, 2005
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.
Number of Pages in PDF File: 31
Keywords: Whisper, Analyst forecast, earnings forecast errors, whisper number
JEL Classification: G14, M14, G29, M41
Date posted: February 28, 2006