Whisper forecasts of earnings per share: Is anyone still listening?

Whisper numbers—unofficial forecasts of earnings per share—were widely reported alongside analyst forecasts and actual earnings in the late 1990s. Bagnoli et al. (1999) showed that whispers appeared to be more accurate than analyst earnings forecasts for a small sample of high-tech firms. We extend their study and investigate whether the superior accuracy of whisper numbers extends to a broader sample, whether whispers have incremental information vis-à-vis analyst forecasts and whether the market rationally uses the information available in whispers. We find that analyst forecasts are more accurate than whispers; however, whisper forecasts contain value-relevant information incremental to analyst forecasts. We also find that the incremental information in whispers is fully incorporated into share price. Lastly we find that whispers are common for firms with lower forecast accuracy, and also that the presence of whispers improves the information environment of firms. Our findings imply that while analyst forecasts are the more accurate expectation of earnings, whispers play a complementary role in providing information about the firm. To the extent that managers convey information to the market in the form of whispers, this study shows that the private information is captured in the share price.