'Other Information' as an Explanatory Factor for the Market's Reactions to Firms' Meeting or Beating Analyst Forecasts

Although analyst forecasts are one of the most critical thresholds for setting market expectations, the meeting of analyst forecasts is not always followed by a positive market reaction. In this study, I observe that the market reacts negatively to 49 percent of firms that meet or beat analyst forecasts and positively to 39 percent of firms that miss analyst forecasts. Intuitively, the unexpected direction of the market's reaction indicates that the market's expectation about future earnings is based on 'other information'. I estimate the content of other information' in analyst forecasts as a basis for the seemingly opposite direction of the market's reactions and find that content to be an explanatory factor. Specifically, I find that the market values a firm's long-run growth, beta, earnings persistence, loss, price decrease from prior year and size when assessing firms' meeting or beating analyst expectations.