Journal article
Understanding Analysts’ Use of Macroeconomic News
Journal of accounting, auditing & finance, 231216132
05 Jan 2024
Abstract
Using a comprehensive measure, the Macroeconomic News Index (MNI), we examine how analysts use macroeconomic news in their earnings forecasts. We find that analysts incorporate but underreact to quarterly macroeconomic news. Cross-sectionally, analysts’ reaction to macroeconomic news varies in a predictable way. Analysts incorporate macroeconomic news more efficiently when firms have lower exposure to the macro economy, when macroeconomic uncertainty is low, and when analysts have more industry-specific experience. Finally, we examine the implications of macroeconomic news on earnings formation and stock returns. We find that quarterly MNI is informative about the procyclicality of firms’ sales and costs and analysts underreact only to sales-side information. We also document that quarterly MNI is predictive of subsequent earnings announcement returns, indicating that investors also underreact to macroeconomic news.
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Details
- Title
- Understanding Analysts’ Use of Macroeconomic News
- Creators
- Ruiting (Dan) Dai - Yale UniversityHui Ding - Shanghai Jiao Tong UniversityX. Frank Zhang - Yale University
- Publication Details
- Journal of accounting, auditing & finance, 231216132
- Publisher
- Sage
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Accounting
- Web of Science ID
- WOS:001136811000001
- Scopus ID
- 2-s2.0-85181505153
- Other Identifier
- 991021861209804721
InCites Highlights
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- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Business, Finance