Transient Institutional Investors Trading Behavior and Analysts' Earnings Forecast Bias

2007 ◽  
Author(s):  
Suresh Radhakrishnan ◽  
Jin Zhang ◽  
Lixin (Nancy) Su ◽  
Xu Li
Keyword(s):  
Institutional Investors ◽  
Earnings Forecast ◽  
Trading Behavior ◽  
Forecast Bias

scholarly journals Earnings Predictability And Broker-Analysts’ Earnings Forecast Bias

2017 ◽  
Vol 33 (6) ◽  
pp. 1285-1302
Author(s):  
Michael Eames ◽  
Steven Glover
Keyword(s):  
Private Information ◽  
Alternative Model ◽  
Analyst Forecast ◽  
Earnings Forecast ◽  
Earnings Expectations ◽  
Forecast Bias ◽  
Analyst Expectations ◽  
Earnings Predictability ◽  
Using Data ◽  
Short Horizon

Scholars have reasoned that analysts issue optimistic forecasts to improve their access to managers’ private information when earnings are unpredictable. While this requires a managerial preference for analyst forecast optimism, the observed walk-down of analyst expectations to beatable forecasts is consistent with a managerial preference for pessimism in short-horizon forecasts. Using data from various sample periods, alternative model specifications, and various measures of earnings unpredictability, we find that pessimism, not optimism, in short-horizon forecasts is associated with increasingly unpredictable earnings. Our results suggest that firms can more effectively manage analysts’ earnings expectations downward when earnings are relatively unpredictable.

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