Analyst Forecasts and Dividend Information

Analyst forecasts made approximately nine months prior to the end of year t are used as surrogates for market expectations of earnings and dividends of year t. A popular mathematical expectations model is also used for comparison. Using the two factor asset pricing models to predict market betas, and to estimate abnormal security returns, cumulative average residuals are computed and partitioned on the sign of the two dividend information variables indicated in the preceding paragraph. The results were consistent with those of Watts and Gonedes in that no significant dividend information was detected.