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Title: Do accurate earnings forecasts facilitate superior investment recommendations?
Authors: Loh, R.K.
Mian, G.M. 
Keywords: Earnings forecasts
Earnings-based valuation models
Security analysts
Stock recommendations
Issue Date: 2006
Citation: Loh, R.K., Mian, G.M. (2006). Do accurate earnings forecasts facilitate superior investment recommendations?. Journal of Financial Economics 80 (2) : 455-483. ScholarBank@NUS Repository.
Abstract: We find that analysts who issue more accurate earnings forecasts also issue more profitable stock recommendations. The average factor-adjusted return associated with the recommendations of analysts in the highest accuracy quintile exceeds the corresponding return for analysts in the lowest accuracy quintile by 1.27% per month. Our findings provide indirect empirical support for valuation models in the accounting and finance literatures (e.g., Ohlson, 1995) that emphasize the role of future earnings in predicting stock price movements. Our results also suggest that imperfectly efficient markets reward information gatherers, such as security analysts, for their costly activities in generating superior earnings forecasts. © 2005 Elsevier B.V. All rights reserved.
Source Title: Journal of Financial Economics
ISSN: 0304405X
DOI: 10.1016/j.jfineco.2005.03.009
Appears in Collections:Staff Publications

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