Does Crowdsourced Research Discipline Sell-Side Analysts?

41 Pages Posted: 13 Feb 2017  

Russell Jame

University of Kentucky

Stanimir Markov

University of Texas at Dallas - Naveen Jindal School of Management

Michael Wolfe

Virginia Tech

Date Written: February 12, 2017

Abstract

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

Jame, Russell and Markov, Stanimir and Wolfe, Michael, Does Crowdsourced Research Discipline Sell-Side Analysts? (February 12, 2017). SMU Cox School of Business Research Paper No. 18-6. Available at SSRN: https://ssrn.com/abstract=2915817 or http://dx.doi.org/10.2139/ssrn.2915817

Russell Jame

University of Kentucky ( email )

Gatton College of Businesss & Economics
Lexington, KY 40506
United States

HOME PAGE: http://russelljame.com

Stanimir Markov (Contact Author)

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States
972 883 5166 (Phone)

Michael Wolfe

Virginia Tech ( email )

Pamplin College of Business
Department of Accounting and Information Systems
Blacksburg, VA 24061
United States
540-231-9170 (Phone)
540-231-2511 (Fax)

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