Do investors learn about analyst accuracy? A study of the oil futures market

We study the impact of analyst forecasts on prices to determine whether investors learn about analyst accuracy. Our test market is the crude oil futures market. Prices rise when analysts forecast a decrease (increase) in crude supplies. In the 15 minutes following supply realizations, prices rise (fall) when forecasts have been too high (low). In both the initial price action relative to forecasts and in the subsequent reaction relative to realized forecast errors, the price response is stronger for more accurate analysts. These price reactions imply that investors learn about analyst accuracy and trade accordingly. Our study seeks to investigate the impact of financial analysts ’ forecasts on asset prices. In addition, we explore investors ’ ability to learn about analyst performance and adjust their trading accordingly. Specifically, we address whether the market reacts to analyst information, whether analyst forecast error affects price, and whether the market learns over time which analysts are most accurate. If the answer is negative, one migh