Impact Of Information Technology On The Accuracy Of Analyst Forecasts

Abstract

We investigate the effect of information technology on analysts forecast accuracy. Our analysis suggests that analyst forecast accuracy has increased with the growth in information technology. We capture the growth in information technology with seven proxy variables; the total sales of information technology related firms, number of computers sold, number of websites, number of hosts, number of registered domains, number of bytes, and packets of information transferred. The results are consistent with our hypothesis that the increase in information technology has decreased the errors in analyst forecasts. Thus, our paper provides evidence of a positive impact of information technology on the overall information environment. These findings are important for investors who use analyst forecasts to value the firm and make investments decisions, and for overall efficiency of capital markets.