Market reaction to analysts’ multi-year forecast revisions: A non-parametric approach

Using a non-parametric approach, this study examines how the stock market in Hong Kong reacts to analysts’ multi-year forecast revisions. The results show that the market reacts to both 1-year-ahead and 2-year-ahead forecast revisions. Even the effect of one horizon's forecast revisions is controlled for, stock returns are still significantly associated with the forecast revisions of another horizon. This suggests that earnings forecasts for different horizons have information content on their own and incremental information relative to each other. The findings also show that the Hong Kong market is concerned with multi-year ahead forecasts and not myopic.