financial analysts forecast revisions and managers reporting behavior abstract this paper studies an analyst s forecasting strategy and a manager s earnings management policy when reporting earnings the manager trades off the disutility he obtains from falling short of the analyst s forecast against the costs of manipulating earnings the model predicts that i the analyst s forecast exceeds median reported earnings ii the analyst is more likely to revise his forecast downward than upward iii mean and median forecast errors are larger in magnitude when the analyst has less precise information and iv the stock market is on average more sensitive to reported earnings than to the analyst s forecasts

asset management and affiliated analysts forecasts the interaction between the various departments of a full service brokerage firm can have positive effects an asset management department operates the firm s mutual funds and has a need for high quality information thus the firm s sell side analysts in the research department are motivated to gather information about particular securities and to use the asset management department as an additional information source the outcome can be to raise the quality of sell side analysts earnings forecasts in the study reported here affiliated analysts earnings forecasts for a security became significantly more accurate as the fund family s percentage ownership of that security increased also the study found a significant positive relationship between the accuracy of an affiliated analyst before the new investment and the percentage of the company s shares acquired by that fund family the implication is that fund families make the largest purchases of stocks for which their affiliated analysts provided th

forecast accuracy of individual analysts in nine industries the purpose of this paper is to investigate whether financial analysts with superior earnings forecasting ability can be distinguished on the basis of ex post forecast accuracy i explore the question by estimating and comparing average accuracy across individuals and by considering whether the observed distribution of analyst forecast accuracies differs from the distribution expected if their relative performances each year were purely random overall i do not find systematic differences in forecast accuracy across individuals financial press coverage suggests there are superior financial analysts for example institutional investor s annual all american research team includes analysts rated by money managers as superior on a variety of criteria including earnings forecasting ability to pick stocks and the quality of written reports clearly financial analyst services other than forecast accuracy are valued by their clients i focus on only one activity earnings forecasting for two reasons first forecast data are available quantitative and can be evaluated against observable earnings outcomes services such as insightful well written research reports are harder to evaluate quantitatively second academic use of analyst forecasts as earnings expectations data in capital markets empir

analyst reputation communication and information acquisition earlier studies have shown that reputational concerns tend to reduce agents opportunistic behavior however a recent study by morris argued that analysts experts reputational concerns may discourage truthful communication when they try to avoid being perceived as being misaligned with investors in this paper i examine the effect of reputational concerns on communication in a setting where analysts can choose their precision endogenously because both misaligned and aligned analysts want investors to trust their reports in the future both will aim to build a reputation for being aligned in equilibrium aligned analysts will acquire more information than misaligned analysts as a result investors may favorably update their beliefs about the analysts type when the report is proven to be accurate therefore both types of analysts will have reputational incentives to communicate truthfully the paper also derives conditions under which the analysts reputational concerns have a nonmonotonic impact on aligned analysts equilibrium precision choices and investors welfare

the characteristics of individual analysts forecasts in europe abstract this study investigates the determinants of financial analysts forecasts differential accuracy in 14 different european stock markets using the i b e s detail history database i find that european financial analysts forecast accuracy is positively associated with analyst firm specific experience forecast accuracy is negatively associated with the number of countries followed by analysts and the age of the forecast surprisingly i find no relationship between forecast accuracy and analysts job experience and the size of the bank employing the analyst

following the leader a study of individual analysts earnings forecasts abstract this paper develops and tests procedures for ranking the performance of security analysts based on the timeliness of their earnings forecasts the abnormal trading volume associated with these forecasts and forecast accuracy our framework provides an objective assessment of analyst quality that differs from the standard approach which uses survey evidence to rate analysts we find that lead analysts identified by our measure of forecast timeliness have a greater impact on stock prices than follower analysts further we find that performance rankings based on forecast timeliness are more informative than rankings based on abnormal trading volume and forecast accuracy we also present evidence that analyst s forecast revisions are correlated with recent stock price performance suggesting that security analysts use publicly available information to revise their earnings forecasts

does director affiliation lead to analyst bias this study examines the ability of security analysts to provide objective earnings forecasts for firms with which the analyst s brokerage firm has a director affiliation the affiliation that we examine is where the brokerage firm has on its board of directors a director or an upper management individual from the firm which an analyst at the brokerage firm provides coverage we find that affiliated analysts tend to provide earnings forecasts that are insignificantly different from unaffiliated analysts in terms of accuracy however we also find that forecasts provided by affiliated analysts tend to be significantly more pessimistic than those provided by their unaffiliated counterparts this pessimistic bias in their earnings forecast will more easily allow the covered firm to beat earnings expectations when earnings are realized we find that this bias surfaced after the global settlement decision an enforcement agreement between large investment banks and the securities and exchange commission sec

analyzing the analysts career concerns and biased earnings forecasts this paper examines the career concerns of security analysts we relate long histories of their earnings forecasts to job separations we find that relatively accurate past forecasts lead to favorable career outcomes such as remaining at or moving up to a high status large prestigious brokerage house controlling for accuracy optimistic forecasts relative to the consensus increase the chances of favorable job separations job separations depend much less on accuracy for analysts who cover stocks that are underwritten by their brokerage houses such analysts are also much more likely to be rewarded for optimistic forecasts than other analysts furthermore job separations were much less sensitive to accuracy and somewhat more sensitive to optimism during the stock market mania of the late 1990s these findings suggest that the well documented analyst forecast optimism bias is likely due to incentives to promote stocks

star power colleague quality and turnover in this article we argue that the existence of greater organizational resources in the form of higher quality colleagues acts as a retention mechanism we test our hypotheses using a panel data set of securities analysts in 24 securities firms over a 9 year period results show that analysts working with higher quality colleagues are less likely to turnover analyst turnover is affected by the performance of two types of colleagues colleagues within one s group and colleagues in the client facing role this colleague effect applies to analyst turnover to competitor firms and not to analysts who exit the securities analysts industry copyright 2010 the author 2010 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

predisclosure information firm capitalization and security price behavior around earnings announcements several studies on the relationship between earnings reports and security price behavior provide evidence suggesting that a significant portion of the information revealed through earnings reports is reflected in security prices prior to the report month e g ball and brown 1968 and brown and kennelly 1972 this has been attributed at least partly to the existence of other more timely sources of information which allow market agents to forecast earnings prior to their release the evidence above reflects an average finding across all firms one question of interest is whether there are significant systematic crosssectional differences in the security price reactions to earnings announcements of firms which are associated with specific firm characteristics that lead to differential amounts of predisclosure information this study focuses on firm size capitalization as one such characteristic a firm

a search based theory of the on the run phenomenon we propose a model in which assets with identical cash flows can trade at different prices infinitely lived agents can establish long positions in a search spot market or short positions by first borrowing an asset in a search repo market we show that short sellers can endogenously concentrate in one asset because of search externalities and the constraint that they must deliver the asset they borrowed that asset enjoys greater liquidity a higher lending fee specialness and trades at a premium consistent with no arbitrage we derive closed form solutions for small frictions and provide a calibration generating realistic on the run premia

dynamic monopoly pricing under a poisson type uncertain demand this article explores dynamic pricing strategies in the presence of uncertainty diffusion dynamics experience curve effects and a poisson type of uncertainty in the demand are incorporated in a model using the framework of a stochastic control problem the results indicate that the movement of the expected price depends on the relative strength of the contingent effects and the effects of the experience if the direction of the former is opposite to the latter and is substantial enough to dominate it the expected price path will show a pattern different from the one predicted by a deterministic model copyright 1992 by university of chicago press

market demand for conservative analysts abstract sell side analysts on balance have incentives to emphasize good company news and downplay the bad resulting in inefficient forecasts we conjecture that this behavior generates a demand for forecasts from conservative analysts who unwind this pattern at least in part resulting in more efficient forecasts to investigate we introduce a measure of analyst conservatism and assess the market reaction to analysts forecast revisions conditioned on their past levels of conservatism we find a stronger market reaction to forecast revisions by more conservative analysts and that this result is heightened for companies with greater institutional investor following

herding in analysts recommendations the role of media abstract this study investigates the impact of media on analysts herding behavior when making stock recommendations we find three main results first we find that analysts herd less when stocks are covered more in the media second when the firm has negative media sentiment analysts tend to herd more third higher disagreement in the media is associated with a higher tendency to herd among analysts these findings are robust to the confounding effect of news flows on returns as well as to alternative explanations in addition we find that the effect of media on the herding behavior is conditional on analyst characteristics

predicting individual analyst earnings forecasts in this study i propose and test a model that predicts individual analyst forecasts of corporate earnings per share eps using the change in the mean consensus forecast of other analysts since the date of the analyst s current outstanding forecast the deviation of the analyst s current forecast from the consensus forecast and cumulative stock returns since the date of the analyst s current forecast i find that these three variables explain about 38 of the variability in analyst forecast revisions while there is evidence of a relation between changes in earnings expectations and price changes virtually all of the explanatory power of my model arises from other analyst forecasts section 2 describes the data bases used and the sample selection process section 3 presents the model and method for predicting individual analyst forecasts section 4 reports the bias and accuracy of the predicted forecasts conclusions are in section 5

the timing of and incentives for annual earnings forecasts near interim earnings announcements abstract security analysts anticipate and respond to interim earnings announcements when they revise their annual earnings forecasts analysts avoid revising for two weeks before an interim announcement and more frequently revise immediately after an announcement as expected revision activity after an interim announcement is greater if absolute unexpected interim earnings are larger if there are more competing analysts and if unexpected interim earnings are negative unexpectedly analysts are reluctant to revise their forecasts early in the fiscal year these findings carry implications for research designs that use analyst forecasts

reputation and performance among security analysts members of the institutional investor all american research team supply more accurate earnings forecasts than other analysts when forecasts are matched by the corporation followed and by the date of brokerage house issuance this contemporaneous advantage is complemented by a timing advantage all americans supply forecasts more often than other analysts stocks returns immediately following large upward forecast revisions suggest that all americans impact prices more than other analysts however there is virtually no difference in returns following large downward revisions nevertheless the collective results suggest a positive relation between reputation and performance and assuming that all americans are better paid pay and performance

corporate performance and managerial remuneration an empirical analysis abstract economic theories of efficient compensation predict a positive relationship between executive pay and corporate performance and yet efforts to document this relationship have been largely unsuccessful in this paper we argue that previous cross sectional studies have omitted important variables which seriously bias their results using data that focus on individual executives over time we find that executive compensation is strongly positively related to corporate performance as measured by shareholder return and growth in firm sales the results are robust to the stock market performance measure utilized

persistence and reversal in herd behavior theory and application to the decision to go public we model rational herd behavior when the underlying value changes over time with payoffs that are either dependent or independent of the underlying value we show that herding does not last forever and is not monotone in signal quality high correlation among agents actions does not necessarily imply herding this suggests alternative empirical methods are needed to detect herding the model has many applications including the ipo decision in which payoffs are state dependent the model implies that the decision to go public is more likely associated with herding than the decision to delay an ipo copyright 2002 oxford university press

gender and job performance evidence from wall street this study concerns the relationship between gender and job performance among brokerage firm equity analysts women s representation in analyst positions dropped from 16 percent in 1995 to 14 percent in 2005 the study found significant gender based differences in performance on various dimensions for example women cover roughly 9 stocks on average as compared with 10 for men and women s earnings estimates tend to be less accurate than men s estimates but the study also found that women are significantly more likely than men to be designated as all stars which indicates that they outperform men in other aspects of job performance