You are here


Do analysts correct the market's mispricing of accruals?

Yong Keun Yoo, 2004
Faculty Advisor: Stephen Penman


Elgers, Lo and Pfeiffer (2003) argue that the bias of analysts' earnings forecasts is significantly less than the bias of market's earnings expectations in interpreting accruals. Their argument implies that analysts' earnings forecasts could potentially mitigate the market's mispricing of accruals by guiding investors to reduce their earnings prediction errors arising from the misinterpretation of accruals. However, their results call for further investigation owing to the following two questionable research design choices: (1) estimating the magnitude of the market's bias by using the framework of the Mishkin test based on the earnings response coefficient model, which is vulnerable to the well-known omitted-variable problem; (2) comparing only the bias of one-year-ahead earnings expectations, while ignoring the bias of earnings expectations for longer periods. By taking an alternative approach to address these issues, I find that analysts' earnings forecasts are more biased than stock prices in interpreting accruals. Thus, contrary to Elgers et al. (2003), I conclude that analysts' earnings forecasts do not mitigate the market's mispricing of accruals.

Doctoral Program News

Honigsberg featured in Ideas at Work

The August issue of Ideas at Work features research that doctoral candidate Colleen Honigsberg led in conjunction with Sharon Katz.

Read More about Colleen

Wazlawek featured in Ideas at Work

Abbie Wazlawek's joint research with Professor Daniel Ames is featured in the June 24th, 2014 edition of Ideas at Work

Read More about Abbie

Ethan Rouen featured in Ideas at Work

Ethan Rouen's joint research with Professor Dan Amiram is featured in the May 15th, 2014 edition of Ideas at Work

Read More about Abbie

Rivas Wins Fellowship

The PhD program is proud to congratulate Miguel Duro Rivas, who was awarded the Nasdaq Educational Foundation Doctoral Dissertation Fellowship.

Read More about Miguel

Wong wins Deloitte Fellowship

We are proud to announce that Yu Ting (Forester) Wong is one of the recipients of the 2014 Deloitte Foundation Doctoral Fellowship in Accounting.

Read More About Yu Ting >

The PhD Program Congratulates John Yao

PhD student John Yao was a finalist in the 2013 M&SOM (Manufacturing & Service Operations Management) student paper competition.

Read More About John >

Honigsberg Named Postdoctoral Fellow

The PhD program is proud to congratulate Colleen Honigsberg, who was named the Postdoctoral Fellow in Corporate Governance at the Millstein Center at Columbia Law School in October 2013

Read More about Colleen >


Application Deadlines

Master of Science in Marketing >

For Fall 2015 Entry:
Deadline: January 5th, 2015


Master of Science in Financial Economics

For Fall 2015 Entry:
Deadline: January 5th, 2015


Master of Science in Management Science and Engineering

For Fall 2014 Entry:
Early Decision: Jan 6, 2015
Regular Decision: Feb 15, 2015


Apply Now
Sept 2015

Deadline: 01/05/15

MS Marketing
Deadline: 01/05/15

MS Financial Economics
Deadline: 01/05/15


Check Application Status

Students listening to classroom lecture

Once you've submitted your application, you can login and track your status by using the link below.

Check Status