The Influence of Forecast Dispersion on the Incremental Explanatory Power of Earnings, Book Value and Analyst Forecasts on Market Prices

Posted: 27 Sep 2006

See all articles by Daniel M. Bryan

Daniel M. Bryan

State University of New York (SUNY) - Accounting & Law

Samuel L. Tiras

Indiana University - Kelley School of Business

Abstract

This study investigates the influence of analyst forecast dispersion on Ohlson's (2001) proposed linear information dynamics where consensus analyst forecasts are suggested as a proxy for other information. Our results indicate that Ohlson's proposed valuation model is most descriptive of market pricing when forecast dispersion, and hence information asymmetry is high. Our results also suggest that when analysts are confronted with high information asymmetry, they tend to focus less on accounting fundamentals and rely more on other non-accounting information, thus decreasing the correlation between the explanatory power of analyst forecasts and that of earnings and book value.

Keywords: Analyst Forecasts, Analyst Forecast Dispersion, Explanatory Power

JEL Classification: G12, G29, M41

Suggested Citation

Bryan, Daniel M. and Tiras, Samuel L., The Influence of Forecast Dispersion on the Incremental Explanatory Power of Earnings, Book Value and Analyst Forecasts on Market Prices. Accounting Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=932628

Daniel M. Bryan

State University of New York (SUNY) - Accounting & Law ( email )

Buffalo, NY 14260
United States

Samuel L. Tiras (Contact Author)

Indiana University - Kelley School of Business ( email )

801 W. Michigan Street
Indianapolis, IN 46202
United States
(317) 274-3420 (Phone)

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