The Effect of Earnings Projection Revisions on Stock Returns in Brazil


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This paper investigates the information content of analysts’ earnings forecast revisions for Brazilian companies, defined as the ability to change stock prices. Using data from I/B/E/S and Economatica covering the period from 1995 through 2002, we find that forecast revisions that follow the consensus (herding behavior) provide small information content. A forecast revision is more informative when it deviates from the consensus, both in the case of good or bad news. Momentum is the main element to explain the behavior of stock returns in light of revised earnings forecasts. The results provide evidence that these revisions are largely based on previous stock performance. The findings are relevant, especially for those that use analysts’ earnings forecasts in their valuation models, as well as portfolio managers and individual investors.

Keyword : earnings forecast revisions, stock returns, earnings per share, analysts revisões de projeções de lucro, retorno das ações, lucro por ação, analistas

How to Cite
Martinez, A. L. (2008). The Effect of Earnings Projection Revisions on Stock Returns in Brazil. Brazilian Business Review, 5(2), 121–135.

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