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Security Analysts, Cash Flow Forecasts, and Turnover

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Title: Security Analysts, Cash Flow Forecasts, and Turnover
Author(s): Pandit, Shailendra; Willis, Richard H.; Zhou, Ling
Subject(s): Earnings forecasting Econometric models Evaluating forecasts Forecasting profession Monitoring forecasts
Abstract: We examine the relation between security analyst turnover and the relative accuracy of their annual earnings and cash flow forecasts. Controlling for self-selection in an analyst’s decision to issue a cash flow forecast, we find that relatively more accurate earnings and cash flow forecasts reduce the probability of turnover. Relative earnings forecast accuracy decreases the probability of turnover more than relative cash flow forecast accuracy. We conduct two cross-sectional tests. We find that relative cash flow forecast accuracy is more important in the analyst’s career outcome when cash flow forecasts are potentially more useful to investors. We find that relative cash flow forecast accuracy is more heavily weighted in the career outcome when the number of other analysts providing cash flow forecasts for the firm is larger. This finding is consistent with economic intuition that relative performance evaluation is more effective when larger groups of individuals are compared.
Issue Date: 2012-12
Publisher: Elsevier
Citation Info: Pandit S, Willis RH, Zhou L. Security analysts, cash flow forecasts, and turnover. International Journal of Forecasting. Oct-Dec 2012;28(4):874-890. DOI: 10.1016/j.ijforecast.2012.01.002
Type: Article
Description: NOTICE: This is the author’s version of a work that was accepted for publication in International Journal of Forecasting . Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in International Journal of Forecasting , [Vol 28, Issue 4, (2012)] DOI:10.1016/j.ijforecast.2012.01.002
URI: http://hdl.handle.net/10027/10567
ISSN: 0169-2070
Date Available in INDIGO: 2013-11-19
 

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