An examination of the differential impact of Regulation FD on analysts' forecast accuracy
Date
2003-04
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Degree Level
Masters
Abstract
The stated intent of Regulation FD was to create a level playing field between
all market participants by requiring publicly traded companies to widely and publicly
disseminate all material information. By restricting selective pre-earnings
announcement guidance to analysts, there is now equal access to company-specific
information not only between the general investing public and analysts but also between
competing analysts. I examine the differential impact of the regulation on the forecast
accuracy of superior, average, and inferior analysts. I find that the forecast accuracy has
declined for each group and that on a relative basis, inferior (superior) analysts
performance has improved (deteriorated) subsequent to the implementation of
Regulation FD. My findings suggest that selective guidance provides some explanation
for the differential forecasting ability of analysts prior to the implementation of
Regulation FD.
I also examine the impact of Regulation FD on the ability of a model to forecast
which analysts will be the most accurate with their earnings forecast estimates. I find
that since Regulation FD has been implemented these models have increased their
ability to predict which analysts will make the most accurate forecasts.
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Degree
Master of Science (M.Sc.)
Department
Finance and Management Science
Program
Finance and Management Science