Can information content of stock prices improve analyst forecast quality?

WANG Jinle, HUO Da, SHI Yongdong, ZHANG Kefang

Systems Engineering - Theory & Practice ›› 2021, Vol. 41 ›› Issue (8) : 1974-1989.

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Systems Engineering - Theory & Practice ›› 2021, Vol. 41 ›› Issue (8) : 1974-1989. DOI: 10.12011/SETP2020-3100

Can information content of stock prices improve analyst forecast quality?

  • WANG Jinle1,3, HUO Da1, SHI Yongdong1,2,3, ZHANG Kefang4
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Abstract

This article uses 2007-2017 data on Chinese A-share listed companies to explore whether stock-rich information can affect analyst forecast quality. We obtain the following results: 1) The information content of stock prices can effectively improve the quality of analyst predictions. With the increase of the information content of stock prices, the analyst forecast bias, forecast optimism, and forecast divergence have all significantly reduced, and the number of analysts' tracking has increased significantly; 2) The lower the company's shareholding, the stronger the accounting robustness, and the worse the transparency of information, the greater the information's impact on the quality of analyst forecasts. The research in this paper has certain theoretical and practical significance for comprehensively understanding the information content of stock prices, promoting the role of analyst in the information market of capital markets, and the healthy development of capital markets.

Key words

analyst / forecast quality / information content of stock prices

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WANG Jinle , HUO Da , SHI Yongdong , ZHANG Kefang. Can information content of stock prices improve analyst forecast quality?. Systems Engineering - Theory & Practice, 2021, 41(8): 1974-1989 https://doi.org/10.12011/SETP2020-3100

References

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Funding

National Natural Science Foundation of China (71702025, 71971046, 72172029, 71772030); The Major Project of the National Social Science Foundation of China (19ZDA094); The General Project of Humanities and Social Sciences Foundation of the Ministry of Education of China (21YJC790113); The Project of the Educational Department of Liaoning Province (LN2019Q41); Liaoning Province "Xing Liao Ying Cai Plan" Project (XLYC1907030); Social Science Planning Fund Project of Liaoning Province (L20BJY027)
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