The Informational Value of Earnings Whispers

Whisper numbers have captured the attention of both the investment community and the financial media. They have heightened the drama of companies’ earnings releases and have been played up as explanations for stock prices’ reactions to actual earnings announcement. I examine the accuracy, the predictive performance and the informational value of these whispers. Gathering my sample from an on‐line source of whisper information, I compare the whispers performance to that of traditional investment analyst forecasts. I find that whispers, while unbiased, are not more accurate than the analysts’ consensus. There is mixed evidence that the market partially reflects the whispers information into price. In fact, I find that a strategy of shorting stocks for which whispers forecasts predict that stocks will outperform is profitable. In summary, whispers are not as accurate as generally portrayed. They are only a fair predictor of stock prices’ movement and do not represent the market’s true earnings expectations.