How Analysts and Whisperers Use Fundamental Accounting Signals To Make Quarterly EPS Forecasts

We extend research on fundamental accounting signals (signals) to a quarterly context and investigate the relative efficiency of analysts and whisperers in using signals in generating onequarter-ahead EPS forecasts. We find (1) a subset of signals found to be relevant in predicting one-year-ahead EPS changes are also relevant in predicting one-quarter-ahead EPS changes, (2) neither analysts nor whisperers fully incorporate information contained in signals in their forecasts, however, whisperers use more signals and (3) the use of signals in predicting onequarter-ahead EPS changes by analysts and whisperers differs conditional on GDP growth and inflation level. These results support the possibility that whisperers and analysts are different market participants and that whisper forecasts contain unique information. Finally, our findings shed light on how analysts and whisperers develop forecasts of one-quarter-ahead EPS and how they differ from each other. This allows market participants to better use both forecasts when making investment decisions.