IDEAS home Printed from
   My bibliography  Save this article

Information Content of Analysts' Stock Ratings and Earnings Forecasts in the Presence of Management Earnings Forecasts


  • Koji Ota

    (Faculty of Commerce, Kansai University, Japan)


This paper evaluates the informativeness of analysts’ ratings and earnings forecast information contained in analyst reports beyond what is publicly provided by management earnings forecasts. Using only analyst reports that have been released practically simultaneously with management forecasts, I find that both analysts’ ratings and earnings forecasts have incremental information content conditional on management forecasts. Further analysis also reveals that analysts’ earnings forecasts are significantly more accurate than concurrently-announced management earnings forecasts. Overall, the findings in this paper present strong evidence that analysts offer informational value to the market beyond information that is provided by company management.

Suggested Citation

  • Koji Ota, 2012. "Information Content of Analysts' Stock Ratings and Earnings Forecasts in the Presence of Management Earnings Forecasts," The Japanese Accounting Review, Research Institute for Economics & Business Administration, Kobe University, vol. 2, pages 87-116, December.
  • Handle: RePEc:kob:tjrevi:dec2012:v:2:p:87-116

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. repec:bla:joares:v:23:y:1985:i:1:p:21-36 is not listed on IDEAS
    2. Elton, Edwin J & Gruber, Martin J & Grossman, Seth, 1986. " Discrete Expectational Data and Portfolio Performance," Journal of Finance, American Finance Association, vol. 41(3), pages 699-713, July.
    3. Womack, Kent L, 1996. " Do Brokerage Analysts' Recommendations Have Investment Value?," Journal of Finance, American Finance Association, vol. 51(1), pages 137-167, March.
    4. Koji Ota, 2010. "The Value Relevance of Management Forecasts and Their Impact on Analysts' Forecasts: Empirical Evidence From Japan," Abacus, Accounting Foundation, University of Sydney, vol. 46(1), pages 28-59.
    5. Alon Brav & Reuven Lehavy, 2003. "An Empirical Analysis of Analysts' Target Prices: Short-term Informativeness and Long-term Dynamics," Journal of Finance, American Finance Association, vol. 58(5), pages 1933-1968, October.
    6. repec:bla:joares:v:35:y:1997:i:2:p:193-211 is not listed on IDEAS
    7. Lys, Thomas & Sohn, Sungkyu, 1990. "The association between revisions of financial analysts' earnings forecasts and security-price changes," Journal of Accounting and Economics, Elsevier, vol. 13(4), pages 341-363, December.
    8. Asquith, Paul & Mikhail, Michael B. & Au, Andrea S., 2005. "Information content of equity analyst reports," Journal of Financial Economics, Elsevier, vol. 75(2), pages 245-282, February.
    9. Conroy, Robert M. & Harris, Robert S. & Park, Young S., 1998. "Fundamental information and share prices in Japan: evidence from earnings surprises and management predictions," International Journal of Forecasting, Elsevier, vol. 14(2), pages 227-244, June.
    10. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    11. Michaely, Roni & Womack, Kent L, 1999. "Conflict of Interest and the Credibility of Underwriter Analyst Recommendations," Review of Financial Studies, Society for Financial Studies, vol. 12(4), pages 653-686.
    12. Robert M. Conroy & Kenneth M. Eades & Robert S. Harris, 2000. "A Test of the Relative Pricing Effects of Dividends and Earnings: Evidence from Simultaneous Announcements in Japan," Journal of Finance, American Finance Association, vol. 55(3), pages 1199-1227, June.
    13. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
    14. Brad Barber, 2001. "Can Investors Profit from the Prophets? Security Analyst Recommendations and Stock Returns," Journal of Finance, American Finance Association, vol. 56(2), pages 531-563, April.
    15. Ivkovic, Zoran & Jegadeesh, Narasimhan, 2004. "The timing and value of forecast and recommendation revisions," Journal of Financial Economics, Elsevier, vol. 73(3), pages 433-463, September.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Analysts’ Roles in Financial Markets; Analysts' Stock Ratings; Analysts' Earnings Forecasts; Management Earnings Forecasts;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kob:tjrevi:dec2012:v:2:p:87-116. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (TJAR Editorial Office). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.