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- Title
Do Differences in Analyst Quality Matter for Investors Relying on Consensus Information?
- Authors
Michaely, Roni; Rubin, Amir; Segal, Dan; Vedrashko, Alexander
- Abstract
This study investigates whether investors can reap economic benefits from analyzing differences in analyst quality. Although high-quality analysts' average forecast is more accurate than the consensus forecast for firms with a large analyst following, the benefits of using high-quality analysts' average forecasts are not economically significant. In contrast, the value of analyst quality differentiation exists in the second moment of forecasts. High-quality analysts' forecast dispersion gives investors an advantage in dealing with uncertainty by predicting return volatility and providing opportunities for economically significant returns using option straddle and post-earnings announcement drift investment strategies. This paper was accepted by Suraj Srinivassan, accounting. Funding: A. Rubin and A. Vedrashko thank the financial support of the Social Sciences and Humanities Research Council of Canada (SSHRC). Supplemental Material: The data are available at https://doi.org/10.1287/mnsc.2023.4699.
- Subjects
CANADA; EARNINGS forecasting; EARNINGS announcements; INVESTORS; INVESTMENT policy; SOCIAL support
- Publication
Management Science, 2024, Vol 70, Issue 2, p751
- ISSN
0025-1909
- Publication type
Article
- DOI
10.1287/mnsc.2023.4699