Research On The Impact Of Cost Stickiness On The Effectiveness Of Analysts' Earnings Forecasts

As an information intermediary in the capital market,the security analyst is a bridge between the investors and the listed corporation.They collect all kinds of information about the listed corporation,make professional interpretation and analysis for these available information,and delivery and release earnings forecasts and investment recommendations to market.By providing scientific and reasonable earnings forecast information,security analysts help investors to try to reduce the information asymmetry,understand the potential investment target more accurately,improve the return of investment,so as to improve the resource allocation efficiency of the capital market.Cost information forecasting is the foundation of earnings forecast,the existence of the cost stickiness often influence the analyst to make accurate prediction of the cost information,thus affecting the accuracy of earnings forecast information.This paper reviews related literature about the Cost Stickiness and its impact on effectiveness of analyst earnings forecast,explores and reveals the influence mechanism of Cost Stickiness on the effectiveness of securities analyst earnings forecast.The paper chose experience data of 194 Shanghai and Shenzhen A-share listed companies of information technology industry during year 2007 to 2014 and make an empirical research on the impact of Cost Stickiness on effectiveness of securities analyst earnings prediction.Empirical results show that there is a negative correlation between the Cost Stickiness and the stock analysts' earnings forecast following,and there is a positive correlation between earnings forecast error and earnings forecast dispersion.The research results show that: the greater the cost stickiness,the smaller the stock analyst's earnings forecast following is,the greater the earnings forecast error is,the greater the degree of the dispersion of earnings forecast is.The conclusions of this study is good for analysts to improve their own level of prediction purposely and make more accurate earnings forecast.At the same time it is favorable for investors to take advantage of analyst earnings forecast for effective investment,and obtain excess returns.