This paper extends the primarily US based literature on management earnings forecasts to an investigation of the role of prospectus earnings forecasts (Pefs) on the pricing of new issues on the Unlisted Securities Market (USM) in the UK. The analysis finds that Pefs are no more biased but are significantly more accurate than time-series forecasts. In addition, traded prices of USM stocks immediately after flotation are found to be positively related to the information content (unexpected component) of the Pefs. There is, however, no evidence of a relationship between the information content of Pefs and the initial offer price of the USM stocks.
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Keasey et al. (1991) studied this question.
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