The Debate Over the Sophistication of Analysts' Cash Flow Forecasts and a Correction of Givoly, Hayn, and Lehavy (2013)

Givoly, Hayn, and Lehavy (2013) dispute Call, Chen, and Tong's (2013) conclusion that analysts' cash flow forecasts represent sophisticated extensions of their earnings forecasts. Our primary purpose is to highlight the fundamental disagreement that leads to the divergent views on the sophistication of analysts' cash flow forecasts. We also correct a number of Givoly, Hayn, and Lehavy's (2013) mis-characterizations of Call, Chen, and Tong (2013). We conclude by encouraging interested readers to consider both Givoly, Hayn, and Lehavy (2009) and Call, Chen, and Tong (2013) and to reach their own conclusions as to the sophistication of analysts' cash flow forecasts