Effects of information asymmetry on analysts' forecast properties

Abstract

Using the sample of all firm-quarter observations between 2000 and 2010, we study the effects of information asymmetry on security analysts' forecast properties. Our results show that as accounting information provides less accurate signs on firms' prospects due to greater information asymmetry, the demand for private information increases after the release of quarterly earnings. As a result, analysts acquire more costly private information, avoiding less costly public information after the quarterly earnings announcements.