Are Analysts all Alike? Identifying Earnings Forecasting Ability

Journal of Investment Management, Vol. 6, No. 2, Second Quarter 2008

Posted: 15 May 2008

See all articles by Louis K.C. Chan

Louis K.C. Chan

University of Illinois at Urbana-Champaign - Department of Finance

David L. Ikenberry

Leeds School of Business, University of Colorado Boulder; University of Illinois at Urbana-Champaign - Department of Finance

Josef Lakonishok

University of Illinois at Urbana-Champaign; National Bureau of Economic Research (NBER)

Sangwoo Lee

University of Illinois at Urbana-Champaign - Department of Finance

Abstract

Investors and the financial media apparently believe that some Wall Street equity analysts research is superior to others. We examine whether such quality differentials exist, in terms of analysts ability to forecast earnings accurately, and whether these differentials are identifiable on an ex ante basis. The results suggest that there is some persistence in analysts forecast accuracy. In particular, forecast accuracy is associated with analyst experience, breadth of coverage, timeliness, and brokerage firm size. Analysts selected for All-Star status by industry publications also tend to have higher forecast accuracy. However, the differences in forecast accuracy do not produce material differences in the dollar magnitudes of forecast errors.

Keywords: Security analysts, earnings forecasts, forcast accuracy, all-star analysts

JEL Classification: G12, G29, M41, G24

Suggested Citation

Chan, Louis K.C. and Ikenberry, David L. and Lakonishok, Josef and Lee, Sangwoo, Are Analysts all Alike? Identifying Earnings Forecasting Ability. Journal of Investment Management, Vol. 6, No. 2, Second Quarter 2008. Available at SSRN: https://ssrn.com/abstract=1132349

JOIM Editor (Contact Author)

Journal of Investment Management (JOIM) ( email )

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925-299-7815 (Fax)

Louis K.C. Chan

University of Illinois at Urbana-Champaign - Department of Finance ( email )

1206 South Sixth Street
Champaign, IL 61820
United States
217-333-6391 (Phone)
217-244-3102 (Fax)

David L. Ikenberry

Leeds School of Business, University of Colorado Boulder ( email )

Boulder, CO 80309-0419
United States
303-492-1809 (Phone)

University of Illinois at Urbana-Champaign - Department of Finance ( email )

1206 South Sixth Street
340 Wohlers Hall
Champaign, IL 61820
United States
217-333-6396 (Phone)
217-333-4101 (Fax)

Josef Lakonishok

University of Illinois at Urbana-Champaign ( email )

1206 South Sixth Street
Champaign, IL 61820
United States
217-333-7185 (Phone)
217-244-3102 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Sangwoo Lee

University of Illinois at Urbana-Champaign - Department of Finance ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

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