Publication Type
Journal Article
Version
submittedVersion
Publication Date
5-2006
Abstract
We find that analysts who issue more accurate earnings forecasts also issue more profitable stock recommendations. The average factor-adjusted return associated with the recommendations of analysts in the highest accuracy quintile exceeds the corresponding return for analysts in the lowest accuracy quintile by 1.27% per month. Our findings provide indirect empirical support for valuation models in the accounting and finance literatures (e.g., Ohlson, 1995) that emphasize the role of future earnings in predicting stock price movements. Our results also suggest that imperfectly efficient markets reward information gatherers, such as security analysts, for their costly activities in generating superior earnings forecasts.
Keywords
Earnings-based valuation models, Earnings forecasts, Stock recommendations, Security analysts
Discipline
Finance and Financial Management | Portfolio and Security Analysis
Research Areas
Finance
Publication
Journal of Financial Economics
Volume
80
Issue
2
First Page
455
Last Page
483
ISSN
0304-405X
Identifier
10.1016/j.jfineco.2005.03.009
Publisher
Elsevier
Citation
LOH, Roger and MIAN, G. Mujtaba.
Do accurate earnings forecasts facilitate superior investment recommendations?. (2006). Journal of Financial Economics. 80, (2), 455-483.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/2641
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.jfineco.2005.03.009