Information Acquisition and Disclosure in Forecasting Contests

74 Pages Posted: 14 Nov 2023 Last revised: 27 Jan 2024

See all articles by Sanjay Banerjee

Sanjay Banerjee

University of Alberta - Department of Accounting, Operations & Information Systems

Eti Einhorn

Tel Aviv University

Nisan Langberg

Tel Aviv University - Coller School of Management

Date Written: November 2, 2023

Abstract

We analyze a model in which competing analysts strategically acquire and disclose information in forecasting contests. In acquiring information, analysts face a tradeoff—while more precise information improves their forecast accuracy and the likelihood of winning the contest, it also increases their conditional signal correlation making differentiation to win the contest harder. In equilibrium, analysts do not make truthful forecasts if contest rewards are sufficiently high. Increasing contest competitiveness, by scaling up contest rewards, generally encourages information acquisition, but can discourage information acquisition by the inefficient analyst, with a high information cost, to the point of not acquiring information at all. Stronger competition can reduce price efficiency at higher reward levels. Analysts with identical information acquisition cost can become differently informed and use opposing forecasting strategies.

Keywords: Tournament; competition; analyst forecasts; ranking

JEL Classification: D82; D83; M41

Suggested Citation

Banerjee, Sanjay and Einhorn, Eti and Langberg, Nisan, Information Acquisition and Disclosure in Forecasting Contests (November 2, 2023). Available at SSRN: https://ssrn.com/abstract=4620785 or http://dx.doi.org/10.2139/ssrn.4620785

Sanjay Banerjee (Contact Author)

University of Alberta - Department of Accounting, Operations & Information Systems ( email )

Edmonton, Alberta T6G 2R6
Canada

Eti Einhorn

Tel Aviv University ( email )

P.O. Box 39010
Ramat Aviv, Tel Aviv, 69978
Israel

Nisan Langberg

Tel Aviv University - Coller School of Management ( email )

Tel Aviv
Israel

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