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Benchmark for earnings performance: management forecasts versus analysts' forecasts

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posted on 2012-01-01, 00:00 authored by S Dhole, Sagarika MishraSagarika Mishra, K Sivaramakrishnan
We investigate the incremental information conveyed by management forecast errors over and above the consensus analyst forecast error at the time of earnings announcement. To the extent that analysts rationally revise their forecasts to subsume information contained in management releases, it is reasonable to argue that management forecasts are ?dated? and that the revised analysts? forecasts would constitute the more timely benchmark to evaluate performance. We find that when management forecasts and the subsequent analyst forecasts are different, management forecast errors convey information to the stock market that is not reflected in the consensus analyst forecast errors.

History

Series

School Working Paper - Financial Econometrics Series ; SWP 2012/06

Pagination

1 - 49

Publisher

Deakin University, School of Accounting, Economics and Finance

Place of publication

Geelong, Vic.

Language

eng

Notes

School working paper (Deakin University. School of Accounting, Economics and Finance) ; 2012/06 We investigate the incremental information conveyed by management forecast errors over and above the consensus analyst forecast error at the time of earnings announcement. To the extent that analysts rationally revise their forecasts to subsume information contained in management releases, it is reasonable to argue that management forecasts are ?dated? and that the revised analysts? forecasts would constitute the more timely benchmark to evaluate performance. We find that when management forecasts and the subsequent analyst forecasts are different, management forecast errors convey information to the stock market that is not reflected in the consensus analyst forecast errors.

Publication classification

CN.1 Other journal article

Copyright notice

2012, The Authors