Analyst Pessimism and Forecast Timing

In this study, we show that on average relatively pessimistic analysts tend to reveal their earnings forecasts later than other analysts. Further, we find this forecast timing effect explains a substantial proportion of the well‐known decrease in consensus analyst forecast optimism over the forecast...

Full description

Saved in:
Bibliographic Details
Published inJournal of business finance & accounting Vol. 40; no. 5-6; pp. 719 - 739
Main Authors Barron, Orie E., Byard, Donal, Liang, Lihong
Format Journal Article
LanguageEnglish
Published Oxford Blackwell Publishing Ltd 01.06.2013
Subjects
analysts' forecast timing
analysts' pessimism
Bias
Decision
Decision theory
Earnings
Earnings announcements
Earnings forecasting
Estimation bias
Forecasts
Investment advisors
Market timing
Optimism
Pessimism
Studies
trading commissions
Online AccessGet full text

Cover

More Information
Summary:In this study, we show that on average relatively pessimistic analysts tend to reveal their earnings forecasts later than other analysts. Further, we find this forecast timing effect explains a substantial proportion of the well‐known decrease in consensus analyst forecast optimism over the forecast period prior to earnings announcements, which helps explain why analysts’ longer term earnings forecasts are more optimistically biased than their shorter term forecasts. We extend the theory of analyst self‐selection regarding their coverage decisions to argue that analysts with a relatively pessimistic view–compared to other analysts–are more reluctant to issue their earnings forecasts, with the result that they tend to defer revealing their earnings forecasts until later in the forecasting period than other analysts.
Bibliography:istex:107607102C4AA638296BD6CE939E4CF4EBBEDC99
ArticleID:JBFA12031
ark:/67375/WNG-6TX7VT5J-P
The first author is from The Pennsylvania State University. The second author is from Baruch College–CUNY. The third author is from Syracuse University. The authors thank Masako Darrough, John Elliott, Dan Givoly, Mike Hyman, Christina Mashruwala, Shamin Mashruwala, John Shon, Jim Vincent, Larry Walther and, especially, Yong Yu. We also thank seminar participants at Baruch College–CUNY, George Mason University, the University of Illinois–Chicago, the Pennsylvania State University, Syracuse University, and conference participants at the AAA Annual Meetings, and the EAA Annual Meetings. Finally, we thank I/B/E/S International Inc. for providing the earnings per share forecast data used in this study. (Paper received November, 2011, revised version accepted January, 2013).
ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0306-686X
1468-5957
DOI:10.1111/jbfa.12031