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What do analysts do? Discussion of “Information interpretation or information discovery: which role of analysts do investors value more?”

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  • Kin Lo

    (The University of British Columbia)

Abstract

Three decades of accounting and finance research has extensively studied the outputs from financial analysts. However, there is sparse systematic evidence on what analysts do to generate their outputs in the form of forecasts, recommendations, and research reports. Livnat and Zhang (Rev Account Stud, 2012) provide interesting new evidence regarding the relative amount of value added that analysts produce by examining investors’ reaction to analysts’ forecast revisions issued promptly after firms’ public disclosures compared with those issued at other times. Their analysis shows that prompt revisions are associated with larger returns, which the authors interpret as evidence that analysts’ ability to interpret public disclosures is more valuable to investors. Three issues bear consideration in the interpretation of these findings.

Suggested Citation

  • Kin Lo, 2012. "What do analysts do? Discussion of “Information interpretation or information discovery: which role of analysts do investors value more?”," Review of Accounting Studies, Springer, vol. 17(3), pages 642-648, September.
    • Handle: RePEc:spr:reaccs:v:17:y:2012:i:3:d:10.1007_s11142-012-9195-6
    DOI: 10.1007/s11142-012-9195-6
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    References listed on IDEAS

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    1. Brown, Stephen & Lo, Kin & Lys, Thomas, 1999. "Use of R2 in accounting research: measuring changes in value relevance over the last four decades," Journal of Accounting and Economics, Elsevier, vol. 28(2), pages 83-115, December.
    2. Frankel, Richard & Kothari, S.P. & Weber, Joseph, 2006. "Determinants of the informativeness of analyst research," Journal of Accounting and Economics, Elsevier, vol. 41(1-2), pages 29-54, April.
    3. Chen, Xia & Cheng, Qiang & Lo, Kin, 2010. "On the relationship between analyst reports and corporate disclosures: Exploring the roles of information discovery and interpretation," Journal of Accounting and Economics, Elsevier, vol. 49(3), pages 206-226, April.
    4. Joshua Livnat & Yuan Zhang, 2012. "Information interpretation or information discovery: which role of analysts do investors value more?," Review of Accounting Studies, Springer, vol. 17(3), pages 612-641, September.
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    Keywords

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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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