Abstract
Analysts' functions are divided into discovery and interpretation roles, but distinguishing between the two is nontrivial. We conjecture that analysts' interpretation skill can be gauged by their forecast revisions following material unanticipated news, in particular, following nonearnings 8-K reports, which arrive at the market unexpectedly. We establish that unanticipated 8-Ks are informative for analysts and find that analysts who are more likely to revise their forecasts following unanticipated 8-Ks provide more timely and accurate forecasts. We document a positive association between analysts' tendency to react to unanticipated 8-Ks and market reaction to their recommendation changes, suggesting investors prefer these analysts' opinions.
| Original language | American English |
|---|---|
| Pages (from-to) | 1491-1518 |
| Number of pages | 28 |
| Journal | Journal of Financial and Quantitative Analysis |
| Volume | 52 |
| Issue number | 4 |
| DOIs | |
| State | Published - 1 Aug 2017 |
Bibliographical note
Publisher Copyright:© 2017 Michael G. Foster School of Business, University of Washington.