Information Interpretation or Information Discovery : Which Role of Analysts Do Investors Value More?

This study provides evidence that a significant percentage of analyst forecast revisions are issued promptly after a broad set of corporate public disclosures and that investors perceive these prompt revisions as more valuable than non-prompt revisions. These results hold for all revisions, revisions outside of the earnings announcement window, or revisions in weeks preceding the earnings announcements, and are also robust to various sensitivity tests. Investors particularly value analysts' prompt interpretation of earnings announcements, Form 8-K filings, or certain qualitative news. To the extent that prompt revisions are more likely to reflect analysts' information interpretation role, our results suggest that investors value more highly analysts' ability to interpret public disclosure, especially less structured or non-financial disclosures, than their ability for information discovery