Are Analysts Overly Optimistic Around Earnings Strings?

51 Pages Posted: 12 Jun 2019

See all articles by Vadim S. Balashov

Vadim S. Balashov

Rutgers School of Business-Camden

Zhanel DeVides

Penn State - Abington

Date Written: May 25, 2019


Firms that report consecutive earnings increases, called earnings strings, receive an overvaluation from the stock market. We examine whether the presence of earnings strings affects equity research analysts’ opinions beyond company fundamentals. We find that analysts issue more optimistic forecasts and more favorable stock recommendations for firms that report earnings strings and that this bias results in lower forecast accuracy. The bias is greater for longer strings, less skillful analysts, and for firms with poor information environment. Furthermore, we find that management guidance increases the cognitive bias around earnings strings.

Keywords: analysts’ forecasts, analysts’ recommendations, analysts’ accuracy, analysts’ optimism, earnings strings

JEL Classification: G11, G14, G24, M41

Suggested Citation

Balashov, Vadim S. and DeVides, Zhanel, Are Analysts Overly Optimistic Around Earnings Strings? (May 25, 2019). Available at SSRN: or

Vadim S. Balashov (Contact Author)

Rutgers School of Business-Camden ( email )

Camden, NJ 08102
United States
856-225-6706 (Phone)

Zhanel DeVides

Penn State - Abington ( email )

1600 Woodland Rd
Abington, PA 19001
United States
267-633-3325 (Phone)

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