Abstract
We examine the informativeness of analyst forecast revisions that are directionally inconsistent with prior stock price movements (sign-inconsistent revisions). Sign-inconsistent revisions represent approximately one-half of the forecast revisions from 1995 through 2010. Our tests indicate that sign-inconsistent revisions are less informative than are sign-consistent revisions. Sign-inconsistent revisions are less likely to be closer to actual earnings realizations and they generate smaller stock price reactions. We also find evidence that sign-inconsistent revisions are associated with analysts' economic incentives to generate trading volume and their behavioural limitations related to information uncertainty. These results suggest that sign-inconsistent revisions do not necessarily benefit investors.
Original language | English |
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Pages (from-to) | 363-391 |
Number of pages | 29 |
Journal | Accounting and Finance |
Volume | 56 |
Issue number | 2 |
DOIs | |
State | Published - Jun 1 2016 |
Externally published | Yes |
Keywords
- Analyst forecast revision
- Forecast inconsistency
- Forecast informativeness