Are revisions of security analysts' earnings ...
|Title||Are revisions of security analysts' earnings forecasts rational? Canadian evidence|
|Author(s)||Sean M. Hennessey|
|Abstract||Research conducted considers the quality of security analysts' earnings forecasts by testing the rationality of forecast revisions for Canadian companies. It appears that when making small positive revisions, analysts overreact; in subsequent periods, forecasts are revised downward. Large positive revisions are followed by significant positive revisions, suggesting underreaction by analysts. Overall, for positive revisions, while both modest over- and underreaction is evident, neither tendency is pronounced. For negative revisions, regardless of their size, significant underreaction is suggested; when initially forecasting earnings decreases, analysts appear to underestimate the decline in earnings. This is consistent with the view that forecasts are optimistic.|
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