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The informational feedback effect of stock prices on management forecasts


  • Zuo, Luo


Using management earnings forecasts over the period 1996–2010, I find that the sensitivity of forecast revisions to contemporaneous stock returns is increasing in the amount of investors’ private information in prices. This effect remains after controlling for various confounds and is robust to the use of mutual fund redemptions as a shock to price changes that is exogenous to fundamental news. Furthermore, investors’ private information helps managers improve their forecast accuracy. Together, these findings suggest that stock prices contain information that managers do not otherwise have regarding firms’ fundamentals, and that managers incorporate this information in their earnings forecasts.

Suggested Citation

  • Zuo, Luo, 2016. "The informational feedback effect of stock prices on management forecasts," Journal of Accounting and Economics, Elsevier, vol. 61(2), pages 391-413.
  • Handle: RePEc:eee:jaecon:v:61:y:2016:i:2:p:391-413
    DOI: 10.1016/j.jacceco.2016.03.001

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    Cited by:

    1. Nemit Shroff, 2017. "Corporate investment and changes in GAAP," Review of Accounting Studies, Springer, vol. 22(1), pages 1-63, March.
    2. repec:spr:reaccs:v:23:y:2018:i:2:d:10.1007_s11142-017-9433-z is not listed on IDEAS
    3. repec:eee:jaecon:v:64:y:2017:i:2:p:183-214 is not listed on IDEAS

    More about this item


    G10; G14; G30; G31; M41; Learning from prices; Private information; Probability of informed trading; Mutual fund redemptions; Management forecasts; Corporate disclosure;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting


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