Journal article
RATIONAL EXPECTATIONS AND THE DYNAMIC ADJUSTMENT OF SECURITY ANALYSTS' FORECASTS TO NEW INFORMATION
The Journal of financial research, Vol.17(3), pp.387-401
10/01/1994
DOI: 10.1111/j.1475-6803.1994.tb00200.x
Abstract
We report the results of unbiasedness tests of security analysts' earnings forecasts. By examining how analysts incorporate new information into their updated earnings forecasts we can analyze directly the effect of new information on analysts' forecast revisions and evaluate whether these revised forecasts converge to rational expectations forecasts. The forecasts made by security analysts participating in the Institutional Brokers Estimate System (IBES) database are analyzed. Using standard statistical tests, we reject the simple form of the rational expectations hypothesis. However, by extending the standard tests used in previous studies, we obtain results that suggest that analysts' earnings forecasts conform to a dynamic form of rationality. The tendency of revised forecasts to converge stochastically toward the rational expectations forecast cautions against the rejection of more complicated forms of rationality.
Details
- Title: Subtitle
- RATIONAL EXPECTATIONS AND THE DYNAMIC ADJUSTMENT OF SECURITY ANALYSTS' FORECASTS TO NEW INFORMATION
- Creators
- Lucy F. Ackert - Wilfrid Laurier UniversityWilliam C. Hunter - Federal Reserve Bank of Atlanta
- Resource Type
- Journal article
- Publication Details
- The Journal of financial research, Vol.17(3), pp.387-401
- DOI
- 10.1111/j.1475-6803.1994.tb00200.x
- ISSN
- 0270-2592
- eISSN
- 1475-6803
- Number of pages
- 15
- Language
- English
- Date published
- 10/01/1994
- Academic Unit
- Finance
- Record Identifier
- 9984962891402771
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