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What Value Analysts?


  • Amir, E.
  • Lev, B.
  • Sougiannis, T.


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

Suggested Citation

  • Amir, E. & Lev, B. & Sougiannis, T., 1999. "What Value Analysts?," Papers 99-12, Columbia - Graduate School of Business.
  • Handle: RePEc:fth:colubu:99-12

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    Cited by:

    1. Elnathan, Dan & Gavious, Ilanit & Hauser, Shmuel, 2010. "An analysis of private versus public firm valuations and the contribution of financial experts," The International Journal of Accounting, Elsevier, vol. 45(4), pages 387-412, December.
    2. Busse, Jeffrey A. & Clifton Green, T., 2002. "Market efficiency in real time," Journal of Financial Economics, Elsevier, vol. 65(3), pages 415-437, September.

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    JEL classification:

    • A11 - General Economics and Teaching - - General Economics - - - Role of Economics; Role of Economists


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