Is Analyst Earnings Forecast Ability Only Firm Specific?<sup>*</sup>

Brown, Lawrence D.; Mohammad, Emad

doi:10.1111/j.1911-3846.2010.01025.x

Cited by 29 publications

(18 citation statements)

References 32 publications

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“…Our result holds through a series of robustness checks considering the influence of industry homogeneity, region homogeneity, business group, the problem of omitted variables and the endogeneity issue. Our result is also aligned with Brown and Mohammad (), who conclude that analyst forecast ability is not firm‐specific because an analyst's ability to deal with the complexities of one firm is likely to help her deal with similar complexities in other firms.…”

supporting

confidence: 88%

“…Following prior literature (Clement and Tse 2005;Brown and Mohammad 2010;Chen et al 2010;Gu and Yang 2013), we also control other potential factors including firm characteristics, analysts' individual characteristics and analysts' following characteristics, which may affect analyst forecast accuracy (see Table 3 for detailed variable definitions).…”

Section: Control Variablesmentioning

confidence: 99%

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Interlock Concentration and Analyst Forecast Accuracy: Value Implications of Interlock

Han

Liu

2018

Australian Accounting Review

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From the perspective of information commonalities among firms with director interlock relationships, this study mainly investigates the outcomes of earnings forecasts by analysts who choose to concentrate on interlocked firms (analysts following both a firm and its interlocked partner firm in their research portfolio). Using interlocked A‐share firms listed in the Chinese Shanghai and Shenzhen Stock Exchanges from 2008 to 2013 as samples, we empirically find that analysts who concentrate on interlocked firms produce more accurate earnings forecasts than analysts who do not. In additional analysis, we also find that analysts with an interlock concentration provide superior earnings forecast quality for other non‐interlocked firms in their research portfolios. Finally, through examining the market reaction to interlocked firms, we find that analysts with an interlock concentration provide new information and improve information efficiency for the capital market.

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supporting

confidence: 88%

Section: Control Variablesmentioning

confidence: 99%

Interlock Concentration and Analyst Forecast Accuracy: Value Implications of Interlock

Han

Liu

2018

Australian Accounting Review

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“…The change in market reactions to forecast revisions before and after the event is captured by the coefficient on F Re v × Post (α 4 ). We compare market reactions to forecast revisions by the same analyst before and after the misstatement, so we can use each analyst as his own benchmark to control for all time-invariant factors, such as gender and forecasting ability, that are found to have a significant effect on investors' reaction to forecast revisions (e.g., Park and Stice [2000], Brown and Mohammad [2010], Kumar [2010]).…”

Section: Regression Modelmentioning

confidence: 99%

Do Opinions on Financial Misstatement Firms Affect Analysts’ Reputation with Investors? Evidence from Reputational Spillovers

Lee

2016

J of Accounting Research

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We examine whether opinions on firms subsequently revealed to have misstated earnings affect analysts' reputation with investors. We find that positive opinions by bullish analysts hurt their reputation, leading investors to react less to their research on non-misstatement firms after the misstatement revelation (i.e., negative spillovers). We also find that bearish analysts issuing more * Boston College.Accepted by Douglas Skinner. We thank the Carroll School of Management at Boston College for financial support. We are grateful to an anonymous reviewer for helpful suggestions that greatly improved this paper. We would also like to thank negative opinions gain reputation and experience positive spillovers. Finally, for analysts who dropped coverage of the misstatement firm before the misstatement revelation, we find no spillovers, which suggests that analysts experience limited reputational gains when they did not issue a public negative opinion. JEL codes: G10; M40; M41

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“…In the robustness check, we use an alternative industry-specific lead analyst measure. We do not use a firm-specific leadership measure, as Brown and Mohammad (2007) find that analyst ability has a general aspect incremental to its firm-specific aspect.…”

Section: Measure Of Path-directing Recommendations and Lead Analystsmentioning

confidence: 99%

Which Analysts Lead the Herd in Stock Recommendations?

Booth

Chang

Zhou

2014

Journal of Accounting, Auditing & Finance

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This article identifies a leader-follower relationship in stock recommendations and documents the characteristics of lead analysts. We develop a metric for identifying lead analysts based on the observation that lead analysts have directed a ''path'' for the consensus in the past year. We find that recommendations are more likely to direct a path for the consensus when they are issued by lead analysts, accompanied by concurrent earnings forecast in the same direction from the same analysts, away from the consensus, followed by price momentum, issued on large and high growth firms, and issued by analysts from large brokers with less frequent recommendations. This result still holds even after controlling for public information, excluding news announcement dates, Regulation Fair Disclosure legislation, and other robustness checks. Empirical analysis shows that there is a greater market reaction to the recommendations of lead analysts than others. Keywords herd, lead, stock recommendations, analystIn this research, we look at the leading-herding behavior of equity analysts. There is an extensive literature on whether analysts herd and which analysts herd. However, there is sparse research on which analysts lead the herd in stock recommendations. This is surprising given the view that identifying lead analysts is important for investors in deciding which analysts to listen to, given that analysts' stock recommendations have investment value. 1 In this article, we fill this gap by providing a method of identifying lead analysts in stock recommendations. We further examine which analysts are more likely to lead and whether lead analysts' recommendations cause greater market reaction.Research (Cooper, Day, & Lewis, 2001) has so far examined which analysts lead the herd in terms of earnings forecasts. However, given the differences between earnings forecasts and stock recommendations, it is important to identify lead analysts using stock recommendations. First, in addition to earnings, analysts need other information to generate Downloaded from stock recommendations. For example, analysts estimate the discount rate when using discount dividend models and benchmark price-earnings (PE) ratios when using price comparables. Second, some analysts use price patterns rather than earnings to generate stock recommendations. Lo and Hasanhodzic (2009) interview leading practitioners of technical analysis and reveal that some analysts make recommendations on patterns in the recent history of prices. Academic researchers (e.g., Altinkilic & Hansen, 2009;Jegadeesh, Kim, Krische, & Lee, 2004) also confirm that analysts often follow a momentum strategy. Third, some analysts make stock recommendations, but do not issue earnings forecasts, making it impossible to judge recommendations based on forecast ability. Loh and Stulz (2011) find that only half the analysts contemporaneously revise earnings when they issue stock recommendations. Jegadeesh and Kim (2010) find that even within the subsample of contemporaneous revisions, only half the...

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Is Analyst Earnings Forecast Ability Only Firm Specific?^*

Cited by 29 publications

References 32 publications

Interlock Concentration and Analyst Forecast Accuracy: Value Implications of Interlock

Interlock Concentration and Analyst Forecast Accuracy: Value Implications of Interlock

Do Opinions on Financial Misstatement Firms Affect Analysts’ Reputation with Investors? Evidence from Reputational Spillovers

Which Analysts Lead the Herd in Stock Recommendations?

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Is Analyst Earnings Forecast Ability Only Firm Specific?*

Cited by 29 publications

References 32 publications

Interlock Concentration and Analyst Forecast Accuracy: Value Implications of Interlock

Interlock Concentration and Analyst Forecast Accuracy: Value Implications of Interlock

Do Opinions on Financial Misstatement Firms Affect Analysts’ Reputation with Investors? Evidence from Reputational Spillovers

Which Analysts Lead the Herd in Stock Recommendations?

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Product

Resources

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Is Analyst Earnings Forecast Ability Only Firm Specific?^*