The Timing of Analysts’Earnings Forecasts and Investors Beliefs. The literature assumes that the timing and order of analysts’earnings forecasts is random. Ignoring strategic timing decisions of analysts may lead to inconsistent estimates of investors’beliefs. The paper analyzes the optimal timing strategies for analysts, and derives consistent estimates of investors’ beliefs, that are based on...

We employ a regression discontinuity design to identify the real effects of share repurchases on other firm outcomes. The probability of share repurchases that increase earnings per share (EPS) is sharply higher for firms that would have just missed the EPS forecast in the absence of the repurchase, when compared with firms that “just beat” the EPS forecast. We use this discontinuity to show th...

This paper examines the career concerns of security analysts using long histories of their earnings forecasts, job separations and stock coverage assignments. Our findings include the following. Relatively good (accurate) past forecast performance increases the probability that an analyst moves from a low status to a high status (large, prestigious) brokerage house, while relatively poor past f...

This paper examines the effect of accounting restatements on a firm’s cost of equity capital. We show that, on average, accounting restatements lead to both decreases in expected future earnings and increases in the firm’s cost of equity capital. Depending on the model used, relative percentage increases in the cost of equity capital average between 7 and 19% in the month immediately following ...

One of the many challenges facing financial economists is to distinguish the theories explaining momentum. Brav and Heaton (2002) show that it is very difficult to distinguish the “rational” models of structural uncertainty (SU) from “behavioral” models of conservatism (C). In this paper, I reexamine the SU model and the C model proposed by Brav & Heaton (2002) in explaining short run momentum....

The computation of implied cost of capital (ICC) is constrained by the fact that around half of all firms do not have analysts’ earnings forecasts. Hou, van Dijk and Zhang (2012, HVZ) present a cross-sectional model to generate forecasts and compute ICC from these forecasts. However, the forecasts from the HVZ model perform worse than those from a naïve random walk model and show anomalous corr...

Companies’ realized earnings depend on overall economic conditions. Market participants should therfore adjust their earnings expectations to surprising macroeconomic news. However, despite its importance for asset pricing models, thus far, empirical research was not able to provide clear-cut evidence of a link between earnings expectations and economic news. Based on a detailed analysis of the...

We study peer effects among workers in the same occupation across firms in the context of security analysts (i.e., we study whether the productivity of a worker is a function of her peers in other firms). We use microdata concerning analysts as well as an identification strategy that employs one feature of social networks: the existence of partially overlapping peer group. The results show stro...