Why Do Security Analysts Issue Early Forecasts?

57 Pages Posted: 12 Jun 2019

Date Written: May 25, 2019

Abstract

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

Balashov, Vadim S., Why Do Security Analysts Issue Early Forecasts? (May 25, 2019). Available at SSRN: https://ssrn.com/abstract=3394317 or http://dx.doi.org/10.2139/ssrn.3394317

Vadim S. Balashov (Contact Author)

Rutgers School of Business-Camden ( email )

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

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