Publication Type

Journal Article

Version

submittedVersion

Publication Date

12-1998

Abstract

Both bond ratings agencies and stock analysts evaluate publicly traded companies and communicate their opinions to investors. Comparing the timelines of each, it is found that Granger causality flows both ways. While most bond downgrades are preceded by declines in actual and forecasting earnings, both actual earnings and forecasts of future earnings tend to fall following downgrades. Although part of this post-downgrade forecast revision can be attributed to negative news regarding actual earnings, most appears to be reaction to the downgrade itself. Little change is found in actual earnings following upgrades. Analysts, however, tend to increase their forecasts of future earnings.

Keywords

Net income, Earnings forecasting, Analytical forecasting, Forecasting models, Bond rating, Coefficients, Causality, Finance, Stock analysis, Forecasting techniques

Discipline

Corporate Finance | Finance and Financial Management

Research Areas

Finance

Publication

Journal of Finance and Quantitative Analysis

Volume

33

Issue

4

First Page

569

Last Page

585

ISSN

0022-1090

Identifier

10.2307/2331132

Publisher

Cambridge University Press

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.2307/2331132

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