Why Do Security Analysts Issue Early Forecasts?
57 Pages Posted: 12 Jun 2019
Date Written: May 25, 2019
I study security analysts’ early forecasts. Forecasts with over one-year horizons constitute nearly one-half of all analysts’ forecasts. I find that the demand for early forecasts is driven by long-term institutional investors and that analyst skills and resources are more important for attaining accuracy at longer horizons. Early forecasts have stronger return reactions than short-term forecasts. Analysts who issue long-term forecasts have a greater ability to affect prices, have better career outcomes, and become “all-stars” more often than their peers who don’t. The optimal composition of analysts’ portfolios is 45%, 35%, and 20% for short-term, medium-range, and long-term forecasts.
Keywords: analysts’ forecasts, analysts’ career outcomes, forecast accuracy, forecast horizon, job turnover
JEL Classification: G11, G14, G24, M41
Suggested Citation: Suggested Citation