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What Value Analysts?

  • Amir, E.
  • Lev, B.
  • Sougiannis, T.
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    We evaluate the contribution of analysts' earnings forecasts to investors' decisions by comparing the association between annual excess returns and a broad set of information items derived from financial statements with the association between excess returns and that information set plus the present value of five-year ahead analysts' earnings forecasts. We thus bring to a sharp focus the incremental contribution (over financial statement information) of the major product of analysts - near and medium-term earnings forecasts - to investors' decisions as reflected by annual excess returns. However, in assessing analysts' contribution from associations with stock returns care should be taken to account for the inherent simultaneity - analysts not only contribute (possibly) to investors, they also observe stock price behavior and learn from investors' decisions. We are therefore using a system of simultaneous equations to control for the endogeneity of both excess returns and analysts' forecasts, allowing us to isolate the net contribution of analysts' forecasts to capital markets

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    Paper provided by Columbia - Graduate School of Business in its series Papers with number 99-12.

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    Length: 41 pages
    Date of creation: 1999
    Date of revision:
    Handle: RePEc:fth:colubu:99-12
    Contact details of provider: Postal: U.S.A.; COLUMBIA UNIVERSITY, GRADUATE SCHOOL OF BUSINESS, PAINE WEBBER , New York, NY 10027 U.S.A
    Phone: (212) 854-5553
    Web page: http://www.gsb.columbia.edu/

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