We investigate the relation between two market anomalies to provide insights into analysts’ role as information intermediaries. Prior research finds that accruals and analyst earnings forecast revisions predict future returns. We find that the accrual and forecast revision strategies generate hedge returns of 15.5% and 5.5% when implemented independently. Strikingly, a combined strategy that uses forecast revisions to refine the accrual strategy generates a hedge return of 28.5%. Firms with consistent accrual and forecast revision signals have less persistent accruals and earnings. We also find that accruals can be used to refine the forecast revision strategy—high accruals are associated with overoptimism in analyst forecasts. Our findings indicate that although forecast revisions reflect information about accrual and earnings persistence beyond that reflected in the level of current year accruals, investors do not fully incorporate this information into their valuation assessments.
-
Faculty
- Academic Areas
- Awards & Honors
- Seminars
-
Conferences
- Accounting Summer Camp
- California Econometrics Conference
- California Quantitative Marketing PhD Conference
- California School Conference
- China India Insights Conference
- Homo economicus, Evolving
-
Initiative on Business and Environmental Sustainability
- Political Economics (2023–24)
- Scaling Geologic Storage of CO2 (2023–24)
- A Resilient Pacific: Building Connections, Envisioning Solutions
- Adaptation and Innovation
- Changing Climate
- Civil Society
- Climate Impact Summit
- Climate Science
- Corporate Carbon Disclosures
- Earth’s Seafloor
- Environmental Justice
- Finance
- Marketing
- Operations and Information Technology
- Organizations
- Sustainability Reporting and Control
- Taking the Pulse of the Planet
- Urban Infrastructure
- Watershed Restoration
- Junior Faculty Workshop on Financial Regulation and Banking
- Ken Singleton Celebration
- Marketing Camp
- Quantitative Marketing PhD Alumni Conference
- Rising Scholars Conference
- Theory and Inference in Accounting Research
- Voices
- Publications
- Books
- Working Papers
- Case Studies
-
Research Labs & Initiatives
- Cities, Housing & Society Lab
- Corporate Governance Research Initiative
- Corporations and Society Initiative
- Golub Capital Social Impact Lab
- Policy and Innovation Initiative
- Rapid Decarbonization Initiative
- Stanford Latino Entrepreneurship Initiative
- Value Chain Innovation Initiative
- Venture Capital Initiative
- Behavioral Lab
- Data, Analytics & Research Computing