Corporate Disclosure, Analyst Forecast Dispersion, and Stock Returns

Ashiq Ali, Mark Liu, Danielle Xu, Tong Yao

Research output: Contribution to journalArticlepeer-review

6 Scopus citations


This article examines whether a corporate disclosure practice is one of the reasons for the forecast dispersion anomaly—the negative relation between analyst forecast dispersion and future stock returns. Prior studies have shown that firms tend to delay the disclosure of bad news and that withholding of news leads to greater dispersion in analysts’ forecasts. Accordingly, we predict that firms with higher dispersion in analysts’ earnings forecasts are more likely to experience poor earnings in the subsequent quarter, and find evidence consistent with this prediction. After controlling for the relation between forecast dispersion and future earnings, we find that forecast dispersion is no longer significantly negatively related to future stock returns. These results suggest that temporary withholding of bad news by firms increases forecast dispersion among analysts and leads to low subsequent stock returns.

Original languageEnglish
Pages (from-to)54-73
Number of pages20
JournalJournal of Accounting, Auditing and Finance
Issue number1
StatePublished - Jan 1 2019

Bibliographical note

Funding Information:
We appreciate the helpful comments from Anup Agrawal, Jon Garfinkal, Doug Hanna (associate editor), Clifton Green, George Jiang, Kathy Kahle, Frank Moers, Alexei Ovtchinnikov, Hong Yan, an anonymous referee, and seminar participants at the University of Arizona, National University of Singapore, annual meetings of American Accounting Association, Western Finance Association, China International Conference in Finance, and European Finance Association. The author(s) received no financial support for the research, authorship, and/or publication of this article.

Publisher Copyright:
© The Author(s) 2016.


  • analyst forecast dispersion
  • corporate disclosure

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics, Econometrics and Finance (miscellaneous)


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