Is Analyst Earnings Forecast Ability Only Firm Specific?

The state of the art in the analyst forecasting literature is that analyst earnings-forecast ability is only firm specific. This view is based on Park and Stice's (2000) finding of the absence of a "spillover" effect, that is, investors do not consider an analyst's earnings-forecast ability regarding firm k when reacting to his earnings forecast revision for firm j. We re-examine the issue of whether or not earnings-forecast ability is only firm specific by introducing a broad measure of general ability defined as earnings-forecast ability for all other firms the analyst follows. We show that a broad measure of general ability is incremental to firm-specific ability both for explaining earnings-forecast accuracy in holdout periods and investor reactions to earnings-forecast revisions. Our findings suggest that earnings-forecast ability has a general aspect incremental to its firm-specific aspect.