Constantinou, C.P., Forbes, W. and Skerratt, L. (2003) Analyst underreaction in the United Kingdom. Financial Management, 32, pp. 93-106.
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Abstract
We revisit the debate on the interpretation given to prior-year earnings changes in predicting analysts' future forecast errors. We advance a new specification of this relation that distinguishes between earnings reversion and momentum. For a large UK dataset for the years 1990-1996, we find substantial underreaction, particularly in situations of earnings momentum. We find that underreaction is further increased for cases of downward earnings momentum when the analyst's merchant bank acts as a broker to the company. We interpret this as a reporting bias caused by an analyst's response to bad news being compromised.
| Item Type: | Articles |
|---|---|
| Status: | Published |
| Refereed: | Yes |
| Glasgow Author(s) Enlighten ID: | Forbes, Dr William |
| Authors: | Constantinou, C.P., Forbes, W., and Skerratt, L. |
| College/School: | College of Social Sciences > Adam Smith Business School > Accounting and Finance |
| Journal Name: | Financial Management |
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