ISSN:
1468-5957
Source:
Blackwell Publishing Journal Backfiles 1879-2005
Topics:
Economics
Notes:
The notion that prices impound a wide array of information, including market expectations, has led to earnings forecast models conditioned on prices. Yet, presumably, analysts’ forecasts capture both public information and certain private information not previously impounded in prices. Accordingly, price-based models are seemingly an inefficient, and less effective, source of expecta-tions. This article investigates this hypothesis using financial analysts', price-based, and naive forecasts. Results indicate that analysts’ forecasts (1) are at least as accurate as price-based and naive models, and (2) yield better expectations for market tests relating returns and earnings. These inferences are robust across different information environments. The evidence suggests that analysts either possess private information or are more effective information processors, or both.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1111/j.1468-5957.1994.tb00359.x
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