Do Investors Learn About Analyst Accuracy?
Chang, Charles; Daouk, Hazem; Wang, Albert
We study the impact of analyst forecasts on prices to determine whether investors learn about analyst accuracy. Our test market is the crude oil futures market. Prices rise when analysts forecast a decrease (increase) in crude supplies. In the 15 minutes following supply realizations, prices rise (fall) when forecasts have been too high (low). In both the initial price action relative to forecasts and in the subsequent reaction relative to realized forecast errors, the price response is stronger for more accurate analysts. These price reactions imply that investors learn about analyst accuracy and trade accordingly.
WP 2008-19 September 2008
Charles H. Dyson School of Applied Economics and Management, Cornell University