Weibo, Information Disclosure and Analysts' Earnings Forecasts
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| Title | Weibo, Information Disclosure and Analysts' Earnings Forecasts
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| Author | Hu Jun and Wang Zhen |
| Organization | School of Finance, Shanghai University of Finance and Economics |
| Email | hoojun98@126.com;wang.zhen@mail.shufe.edu.cn |
| Key Words | Weibo; Information Technology; Nonfinancial Information; Security Analyst; Earnings Forecasts |
| Abstract | A market in which prices always "fully reflect" available information is called "efficient". However, due to the dramatic development of information technology, social network has been widely used in public and companies. The amount, types and the transmission routes of information have been changed drastically. As the most professional information users, security analysts' forecasting behaviors will be influenced by this change undoubtedly. Therefore, this paper studies how the using of weibo among companies impacts the earnings forecasting behaviors of security analysts. We find that: (1) the frequency of forecasting revisions increases after the launch of weibo, which means weibo discloses enough information which would force analysts to revise their forecasts; (2) the average forecasting error and dispersion both decrease after the using of weibo, which means the information disclosed by weibo is an important source helping developing analysts' earnings forecasts; (3) sensitivity of stock price to analysts' forecasting revision increases after the using of weibo. One possible explanation for this phenomenon is that individual investors cannot fully understand the information disclosed by weibo, hence this information can be treated as "incremental information" brought by analysts since they can interpret this nonfinancial information into their earnings forecast and research reports effectively. |
| Serial Number | WP667 |
| Time | 2014-08-22 |
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