Analysts, macroeconomic news, and the benefit of active in-house economists

Artur Hugon, Alok Kumar, An Ping Lin

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

Although macroeconomic news has a major impact on corporate earnings, anecdotal evidence suggests that financial analyst research is inefficient with respect to such news. Examining analysts' earnings research, we find that they underreact to negative macroeconomic news. Analysts are not all equal, though, as analysts employed at the same firm as an active macroeconomist underreact much less. We find that the benefit of analyst access to an economist is concentrated in firms that are high in cyclicality relative to their industry, high in cyclicality in general, and that are smaller in size. In addition, analysts who are exposed to more accurate or awardwinning in-house macroeconomists benefit more. Investors appear to recognize the advantage of access to macroeconomists, reacting more strongly to these analysts' forecast revisions. Overall, our results suggest that the presence of an active in-house macroeconomist improves the efficiency and credibility of analyst research.

Original languageEnglish (US)
Pages (from-to)513-534
Number of pages22
JournalAccounting Review
Volume91
Issue number2
DOIs
StatePublished - Mar 1 2016

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Macroeconomic news
Analysts
Economists
Cyclicality
News
Analysts' forecast revisions
Industry
Financial analysts
Credibility
Investors

Keywords

  • Forecast optimism
  • GDP
  • Macroeconomist
  • Price efficiency
  • Sell-side analyst

ASJC Scopus subject areas

  • Finance
  • Accounting
  • Economics and Econometrics

Cite this

Analysts, macroeconomic news, and the benefit of active in-house economists. / Hugon, Artur; Kumar, Alok; Lin, An Ping.

In: Accounting Review, Vol. 91, No. 2, 01.03.2016, p. 513-534.

Research output: Contribution to journalArticle

Hugon, Artur ; Kumar, Alok ; Lin, An Ping. / Analysts, macroeconomic news, and the benefit of active in-house economists. In: Accounting Review. 2016 ; Vol. 91, No. 2. pp. 513-534.
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