Experience, Information Asymmetry, and Rational Forecast Bias

Knill, April M.; Minnick, Kristina; Nejadmalayeri, Ali

doi:10.1007/978-1-4614-7750-1_2

Cited by 3 publications

(1 citation statement)

References 56 publications

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“…In Knill et al . (), the mean analyst experience equals 12.71 quarters, approximating three years. Luo and Xie () also show that analysts on average have 3.59 years of experience.…”

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confidence: 99%

Analyst Firm Coverage and Forecast Accuracy: The Effect of Regulation Fair Disclosure

Dong

et al. 2017

Abacus

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In this study, we revisit the relationship between analyst firm coverage and forecast accuracy. In contrast to the proposed negative association in Clement (1999) owing to the portfolio complexity effect, we hypothesize an 'economy-of-scale effect' that is likely to dominate when analysts rely mostly on public information. In support of the latter effect, we find a positive association between firm coverage and forecast accuracy after the enactment of Regulation Fair Disclosure (Reg FD), which substantially reduces the flow of material private information to analysts. Such a result survives a battery of robustness analyses. We further show that, in the post-Reg FD period, covering more firms increases an analyst's probability of being selected as a star analyst in the subsequent year. Overall, our findings highlight the importance of the information environment in shaping the economic link between an analyst's firm coverage and forecast accuracy.

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“…In Knill et al . (), the mean analyst experience equals 12.71 quarters, approximating three years. Luo and Xie () also show that analysts on average have 3.59 years of experience.…”

mentioning

confidence: 99%