Accuracy, usefulness and the evaluation of analysts' forecasts

This paper provides evidence that forecast immediacy (FI), which is the speed with which analysts respond to a significant change in the publicly available information set, is an ex-ante determinant of analysts' forecast properties. Specifically, the greater the FI the less accurate analysts' forecasts and the greater the dispersion in analysts' forecasts. Conversely, FI is positively related to forecast usefulness, which is the extent to which the forecast improves upon the accuracy of existing forecasts. One implication of these results is that it may be appropriate to evaluate separately analysts whose forecasts tend to have high FI and analysts whose forecasts tend to have low FI. A second implication is that, to the extent that forecasts with high FI tend to be more accurate than prior forecasts, one might place less weight on forecasts that precede high FI forecasts.