When Attention Is Away, Analysts Misplay: Distraction and Analyst Forecast Performance

68 Pages Posted: 3 Aug 2020

See all articles by Thomas Bourveau

Thomas Bourveau

Columbia Business School - Accounting, Business Law & Taxation

Alexandre Garel

Audencia Business School; Labex ReFi

Peter R. Joos

INSEAD

Arthur Petit-Romec

SKEMA Business School; Université Côte d'Azur

Date Written: June 1, 2020

Abstract

We construct a measure of analyst-level distraction based on analysts’ exposure to exogenous attention-grabbing events affecting firms under coverage. We find that temporarily distracted analysts achieve lower forecast accuracy, revise forecasts less frequently, and publish less informative forecast revisions relative to non-distracted analysts. Further, at the firm level, analyst distraction carries real negative externalities by increasing information asymmetry for stocks that suffer from a larger extent of analyst distraction during a given quarter. Our findings thus augment our understanding of the determinants and effects of analyst effort allocation and broaden the literature on distraction and information spillover in financial markets.

Keywords: Limited Attention, Distraction, Analyst, Forecasts, Information Environment

JEL Classification: G10, G11, G14, G41

Suggested Citation

Bourveau, Thomas and Garel, Alexandre and Joos, Peter R. and Petit-Romec, Arthur, When Attention Is Away, Analysts Misplay: Distraction and Analyst Forecast Performance (June 1, 2020). Available at SSRN: https://ssrn.com/abstract=3644907 or http://dx.doi.org/10.2139/ssrn.3644907

Thomas Bourveau

Columbia Business School - Accounting, Business Law & Taxation ( email )

3022 Broadway
New York, NY 10027
United States

Alexandre Garel

Audencia Business School ( email )

8 Road Joneliere
BP 31222
Nantes Cedex 3, 44312
France

Labex ReFi ( email )

79 avenue de la République
Paris, 75011
France

Peter R. Joos (Contact Author)

INSEAD ( email )

1 Ayer Rajah Avenue
Singapore, 138676
Singapore

Arthur Petit-Romec

SKEMA Business School ( email )

Sophia Antipolis
France

Université Côte d'Azur ( email )

France

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