Stock price behavior associated with managers' earnings and revenue forecasts

There is a correlation between the earnings forecasts of management and stock price reactions. A hypothesis concerning the informativeness of managers' earnings and revenue forecasts for predicting stock prices was used to examine the motivation and effects associated with revenue forecasts. The hypothesis contends that earnings forecasts are more informative when released without managers' forecasts of revenue, and managers' forecasts of revenues are informative about prices. An analysis of data on annual earnings and revenues and managers' forecasts of annual earnings from the Wall Street Journal Index of Jan 1978 to Dec 1982 revealed that earnings forecasts that were released without revenue forecasts were price informative, while those released with revenue forecasts were not.