Reported Earnings and Analyst Forecasts as Competing Sources of Information: A New Approach
AbstractWe study information flows between earnings and forecasts, using suitably adapted Granger causality tests. This approach complements existing cross-sectional studies by abstracting from stock market reactions to information, and focussing on dynamic interactions between information flows instead. We find bi-directional causality in timeseries of analyst earnings forecasts and reported earnings, supporting our expectation that forecasts contribute to information that is reflected in future reports. Further, our evidence of feedback suggests that past reports and forecasts are both reflected in future forecasts, implying that the information in reports has inherent value, and that forecasts do not fully substitute for reports.
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Bibliographic InfoPaper provided by Australian National University, College of Business and Economics, School of Economics in its series ANU Working Papers in Economics and Econometrics with number 2007-488.
Length: 49 pages
Date of creation: Oct 2007
Date of revision:
Other versions of this item:
- Heather Anderson & Howard Chan & Robert Faff & Yew Kee Ho, 2012. "Reported earnings and analyst forecasts as competing sources of information: A new approach," Australian Journal of Management, Australian School of Business, vol. 37(3), pages 333-359, December.
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ACC-2008-01-26 (Accounting & Auditing)
- NEP-ALL-2008-01-26 (All new papers)
- NEP-FOR-2008-01-26 (Forecasting)
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