The purpose of the study is to investigate if the use of information conveyed by the prior announcer`s earnings release to the later announcer in the same industry can improve accuracy of financial analysts` earnings forecasts. The study also investig...
The purpose of the study is to investigate if the use of information conveyed by the prior announcer`s earnings release to the later announcer in the same industry can improve accuracy of financial analysts` earnings forecasts. The study also investigates two additional factors which determine the magnitude of the improvement in earnings forecast accuracy: earnings covariances and firm size. Empirical results for 51 Value Line firms for the period of 1972-1988 indicate that inclusion of intra-industry information transfers in forecasting earnings significantly reduces forecast bias and forecast accuracy measured by absolute mean errors. Consistent with expectation, results of firm size tests indicate that improvement in forecast accuracy is significantly greater for small than for large firms. Another important finding is that the improvement in forecast accuracy is directly related with earnings cavariances between prior and later announcers