Does Crowdsourced Research Discipline Sell-Side Analysts?
41 Pages Posted: 13 Feb 2017
Date Written: February 12, 2017
We examine whether increased competition stemming from technological innovation disciplines sell-side analysts. We document a decline in short-term forecast bias for firms added to Estimize, an open platform that crowdsources short-term earnings forecasts, relative to matched control firms; this decline is greater when (1) existing sell-side competition is smaller, (2) earnings uncertainty is higher, and (3) Estimize coverage is less biased and more accurate. We also document an increase in short-term forecast accuracy and representativeness. Finally, we find no change in bias for longer-horizon forecasts or recommendations, suggesting competition from Estimize rather than broad economic forces drives our results.
Keywords: forecast bias, analyst conflict of interests, crowdsourcing, competition
JEL Classification: D83, G24, M41
Suggested Citation: Suggested Citation