Analysts Reliance on the Capital Market’s Estimate For Firm Growth Potential: An Empirical Analysis Of Forecast Error and Bias

Lonnie Bryant*, Jocelyn Evans**, Peter S. Knox***
*Assistant Professor, Department of Economics and Finance, College of Charleston School of Business and Economics, South Carolina.
**Professor, Department of Economics and Finance, College of Charleston School of Business and Economics, South Carolina.
***Chair of Accounting, Knox School of Accounting, Hull College of Business, Augusta State University.
Periodicity:September - November'2009
DOI : https://doi.org/10.26634/jmgt.4.2.1054

Abstract

The popular press often states that analyst decisions over an extended time period have significant influence over security prices. It is often assumed that analysts add value by conducting in-depth research on public traded firms that enable investors to gauge the attractiveness of each stock. We analysis whether either analyst forecast error or the magnitude of error bias affect the market’s estimated of a firm’s future growth potential as measured by Tobin’s Q and vice-versa. The findings show that analyst have no influence over capital market perception of firm value. Instead, analyst forecast error and bias herds around movement in Tobin’s Q. (JEL G10, G29).

Keywords

Analyst Forecast error and bias, Tobin's Q, Information Intermediation.

How to Cite this Article?

Lonnie Bryant, Jocelyn Evans and Peter S. Knox (2009). Analysts Reliance on the Capital Market's Estimate for Firm Growth Potential: An Empirical Analysis of Forecast Error and Bias. i-manager’s Journal on Management, 4(2), 21-36. https://doi.org/10.26634/jmgt.4.2.1054

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