Publication Type
Working Paper
Version
publishedVersion
Publication Date
9-2023
Abstract
We offer a parsimonious index at the individual analyst level to measure the extent to which an analyst relies on earnings and long-term growth forecasts in producing her advice. Using this index, we evaluate the contribution of earnings and growth forecasts to the investment value of analysts’ stock recommendations. We find that the fraction of analysts’ advice attributed to forecasts varies considerably across analysts and sectors. The investment value of recommendations is higher for analysts who rely less on their forecasts and more on other sources of information when forming investment advice. Investors recognize the superiority of recommendations from analysts who rely to a larger degree on information not included in forecasts, as stock prices respond more strongly to changes in their recommendations. Access to management does not explain the superior performance of these analysts.
Keywords
Financial analysts, stock recommendations, earnings forecasts, price targets
Discipline
Finance | Finance and Financial Management
Research Areas
Finance
First Page
1
Last Page
41
Identifier
10.2139/ssrn.3864432
Publisher
SSRN
Citation
KADAN, Ohad; MADUREIRA, Leonardo; WANG, Rong; and ZACH, Tzachi.
What drives the value of financial analysts’ advice? The role of earnings and growth forecasts. (2023). 1-41.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/7126
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
External URL
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3864432
Additional URL
https://doi.org/10.2139/ssrn.3864432