In this study, we examine how analysts are affected by the public actions of investors and other analysts by closely examining how analysts revise their earnings forecasts after an earnings announcement. In particular, we hypothesize that analysts observe the actions of investors and other...

We investigate analysts' use of stock returns and other analysts' forecast revisions in revising their own forecasts after an earnings announcement. We find that analysts respond more strongly to these signals when the signals are more informative about future earnings changes. Although analysts...

(cont.) around thresholds do convey information about a firm's future performance, firms with a higher degree of information asymmetry between the management and investors are more likely to use this signaling mechanism, and the capital market recognizes the information content of the earnings...

Previous research documents that financial ratios (fundamental signals) derived from publicly available financial statements can predict future abnormal stock returns. This paper examines whether institutional investors trade on these fundamental signals and the implications of institutional...