Transaction responses to analysts' earnings forecasts, news type and trader type

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)1043-1058
Journal / PublicationJournal of Business Finance and Accounting
Volume23
Issue number7
Publication statusPublished - Oct 1996
Externally publishedYes

Abstract

In this paper, we hypothesize that the number of transactions around revisions in analysts' earnings forecasts increases with the magnitude of revisions (i.e. the informedness effect) and decreases with the consensus of beliefs regarding the information content of revisions (i.e. the consensus effect). Empirical evidence strongly supports these hypothesized relations even after controlling for the firm size effect. It is also found that the effect of analysts' forecast revision on the number of transactions differs significantly between upward and downward revisions, while the effect of consensus does not. Further, our results indicate that transaction responses to revisions in analysts' earnings forecasts differ systematically between small individual traders and large institutional traders, and that the positive informedness effect and the negative consensus effect are more significant for the large trader group than for the small trader group. © Blackwell Publishers Ltd. 1996.

Research Area(s)

  • Analysts' forecast revisions, Consensus, News type, Trader type, Transaction responses