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Analyst Forecasting Ability and the Stock Price Reaction to Forecast Revisions

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  • Chul W. Park

    (The Hong Kong University of Science & Technology)

  • Earl K. Stice

    (Brigham Young University)

Abstract

We empirically identifysuperior analysts using their past forecasting track record fora specific firm's earnings and demonstrate that subsequent forecastannouncements by these superior analysts have a greater impacton security prices than do the forecasts of other analysts. Wefind that, in our sample, the price effects of this firm-specificforecasting ability do not spill over to other firms followedby the same analyst. We also demonstrate that an analyst's forecastingability with respect to the earnings of a certain firm is relativelymore important in the period immediately preceding an earningsannouncement by that firm.

Suggested Citation

  • Chul W. Park & Earl K. Stice, 2000. "Analyst Forecasting Ability and the Stock Price Reaction to Forecast Revisions," Review of Accounting Studies, Springer, vol. 5(3), pages 259-272, September.
    • Handle: RePEc:spr:reaccs:v:5:y:2000:i:3:d:10.1023_a:1009668711298
    DOI: 10.1023/A:1009668711298
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