Earnings announcements and the convergence (or divergence) of beliefs
Article Abstract:
The effect of earnings announcements on the convergence and divergence of securities analysts' beliefs was researched. Prior research reveals two major phenomena concerning the earnings forecasts of securities analysts: analysts are more accurate than time-series models; and, as the forecast horizon decreases, the forecasts of analysts are less dispersed and more accurate. An evaluation of the effect on the dispersion of analysts' one-year earnings forecasts by annual earnings announcements was conducted using a Bayesian belief revision model. Research results indicate that the surprise content of the earnings forecasts has a significant effect in determining the convergence or divergence of analysts' forecasts. When annual earnings announcements contain larger surprises, the divergence of analysts' earnings forecasts is greater.
Publication Name: Accounting Review
Subject: Business, general
ISSN: 0001-4826
Year: 1991
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Volume of trading and the dispersion in financial analysts' earnings forecasts
Article Abstract:
The research of H. Varian (1985) and J.M. Karpoff (1986) postulated that trading volume is positively related to the divergence of beliefs. The degree of dispersion in the earnings-per-share forecasts of securities analysts was used as a proxy for agents' perceptions of firms' prospects. It was hypothesized that the volume of common shares traded would be correlated with the dispersion of earnings forecasts and the mean revision of forecasts. Research involved monthly observations of 420 calendar-year firms for the years 1978 to 1981 and involved 16,747 observations over four years. Research results indicate a positive correlation between the volume of trading and the dispersion in analysts' earnings forecasts.
Publication Name: Accounting Review
Subject: Business, general
ISSN: 0001-4826
Year: 1991
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Common stock returns surrounding earnings forecast revisions: more puzzling evidence
Article Abstract:
Accounting and financial research both are concerned with the relation between fluctuations in stock prices and changes in earnings forecasts. Common stock returns at the times surrounding the dates for earnings forecast revisions were analyzed using a large database of securities analysts' forecasts. Research results indicate that revisions to analysts' forecasts affect common stock prices, and price reactions are greatest when the revisions are in the top or bottom five percent of the pool of forecast revisions. For six months after forecast revisions, stock prices tend to drift toward the direction of the revision, and the reaction in prices does not incorporate all available information.
Publication Name: Accounting Review
Subject: Business, general
ISSN: 0001-4826
Year: 1991
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