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Do Supplementary Sales Forecasts Increase the Credibility of Financial Analysts' Earnings Forecasts?
Edmund C Keung, National University of Singapore
ABSTRACT. I examine whether the market reacts more strongly to earnings forecast revisions when financial analysts supplement their earnings forecasts with sales forecasts. I find that earnings forecast revisions supplemented with sales forecast revisions have a greater impact on security prices than stand-alone earnings forecast revisions do. Supplemented earnings forecasts are more accurate and timely than stand-alone earnings forecasts, controlling for other individual analyst characteristics. These results suggest supplementary sales forecasts lend credibility to earnings forecasts because financial analysts provide sales forecasts when they are more informed.
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