Analysts' Earnings Forecast Revision Around Industry Member Firms' Earnings Announcement
Posted: 25 May 2000 Last revised: 29 Jan 2014
Date Written: January 1, 2000
Abstract
This study examines: (1) whether earnings announcements by industry member firms trigger analysts to revise their forecasts of other member firms' soon-to-be-released contemporaneous earnings and (2) how the revision is related to forecast bias and the announcing firms' earnings news. The forecast revision on a nonannouncing firm is measured as the change in analyst forecasts of its quarterly earnings immediately before and after an announcing firm's earnings release date. We find that analysts revise forecasts on the nonannouncing sample firms consistently in direction with the signs of the announcing firms' unexpected earnings. The evidence, however, is pronounced only for downward, not upward, revisions and for quarters in which the announcers fail to meet analysts' expectations. The findings suggest that a member firm's earnings announcement is a timely source of information for analysts to revise their preceding forecasts of other member firms' contemporaneous earnings. They also suggest that the forecast revision is not symmetric in direction and varies with announcing firms' actual earnings news.
JEL Classification: M41, G14, G29
Suggested Citation: Suggested Citation