Abstract:

Previous research presented evidence of bias and positive serial correlation in forecast errors suggesting that analysts do not properly recognize the time-series properties of earnings when setting expectations of future earnings. A reason for the security analyst underreaction is the level of multinationality of the firm's activities. This study shows that analysts underreact to prior information more as the level of multinationality of the firm examined increases.

Keywords: multinationality; security analyst; underreaction

Document Type: Research article

Affiliations: 1: University of Illinois at Chicago