Abstract
I examine whether and how corporate news releases inuence equity analysts’ earnings forecasts. Combining large databases of U.S. corporate news releases and individual sell-side analysts’ earnings forecasts during 2000 to 2010, I investigate whether corporate news reports inuence the direction and magnitude of equity analysts’ earnings forecast revision. I nd that equity analysts’ forecast revision is signicantly inuenced by the tone of the news. Analysts’ revision directions and magnitude are both positively related to the tone of the news. Moreover, the relation between news and forecast revision is stronger for negative news and news that contains information regarding rm fundamentals. These results are obtained when earnings announcement periods are removed, highlighting the informational roles of corporate news in shaping analysts’ decisions.
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