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When managers provide earnings guidance, analysts normally respond within a short time frame with their own earnings forecasts. Within this setting, I investigate whether financial analysts use publicly available information to adjust for predictable error in management guidance and, if

When managers provide earnings guidance, analysts normally respond within a short time frame with their own earnings forecasts. Within this setting, I investigate whether financial analysts use publicly available information to adjust for predictable error in management guidance and, if so, the explanation for such inefficiency. I provide evidence that analysts do not fully adjust for predictable guidance error when revising forecasts. The analyst inefficiency is attributed to analysts' attempts to advance relationship with the managers, analysts' compensation not tie to forecast accuracy, and their forecasting ability. Finally, the stock market acts as if it does not fully realize that analysts respond inefficiently to the guidance, introducing mispricing. This mispricing is not fully corrected upon earnings announcement.
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    Title
    • Do financial analysts respond efficiently to managers' earnings guidance?
    Contributors
    Date Created
    2012
    Resource Type
  • Text
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    Note
    • Partial requirement for: Ph. D., Arizona State University, 2012
      Note type
      thesis
    • Includes bibliographical references (p. 46-51)
      Note type
      bibliography
    • Field of study: Accountancy

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    by Kuan-Chen Lin

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