Empirical Study On The Impact Of Analyst Forecast Revision On Stock Price

As an important participant in the capital market, the forecast revision behavior of securities analysts can help investors to make investment decisions, so as to improve the efficiency of capital market pricing. However, in China the development of capital market is still immature and the individual investors are the main participants. The investor normally lack of professional judgment ability and their investment behaviors are generally naive, they can not distinguish the information content of securities analysts forecast revision, so the absorption efficiency of the analysts forecast revision information is extremely low. Therefore, in the capital market environment of China, what kind of reaction model the stock price give to the analysts'forecast revision magnitude and information content in the short-term and long-term is still a issue need to further discussion. And it also be the focus of this paper.This paper uses event study to investigate the impact of analyst forecast revision magnitude and information content on stock price in different windows based on analyst's single report for A share stock during 2006 to 2014. The empirical result shows that in the event window, the forecast revision magnitude of analyst do not have a significant impact on stock price, but after considering the analyst forecast revisions information content, we find that compared to low-innovation revisions, high-innovation revisions have a more significant impact on the stock price, and can promote the markets'reaction to the analysts'forecast revision magnitude. In the drift window, the forecast revision magnitude information of analysts are gradually absorbed by the market, and it begin to have a significant positive impact on stock prices in the fifth trading days after the analyst forecast revision, as the passage of time the effect gradually strengthened. Furthermore, we find that compared to low-innovation revisions, the price drift phenomenon of high-innovation revisions is more obvious, namely high-innovation revisions cause the overreaction of investors.This study can expand the research of analyst forecast characteristics in the academic circles. Simultaneously, it can improves investors' concerns on securities analyst forecast, and provides relevant experience to investors'investment strategy making and the improvement of market mechanisms.