Analyst forecasting ability and the stock price reaction to forecast revisions

We empirically identify superior analysts using their past forecasting track record for a specific firm's earnings and demonstrate that subsequent forecast announcements by these superior analysts have a greater impact on security prices than do the forecasts of other analysts. We find that, in our sample, the price effects of this firm-specific forecasting ability do not spill over to other firms followed by the same analyst. We also demonstrate that an analyst's forecasting ability with respect to the earnings of a certain firm is relatively more important in the period immediately preceding an earnings announcement by that firm. © 2000 Kluwer Academic Publishers