Prior research indicates that analysts' forecasts of earnings tend to be optimistic.
Analysts' optimism may be attributed to experience, cognitive information search strategies, motivational incentives or some combination thereof. In this study, we conduct an experiment that uses a computerized eye-movement retinal imaging system to capture the cognitive search strategy of 60 professional financial analysts. We find that, within the experiment, more accurate analysts employ a directive information search strategy, whereas less accurate analysts employ a sequential search strategy. Experimental results also indicate that motivational incentives intensify the analysts' tendency to provide optimistic earnings forecasts. We also conduct an examination of the analysts' predictive accuracy outside the experimental setting.