Long-Horizon Forecasts

Abstract

Why do some analysts reveal their long-horizon forecasts, while many others do not? We find that these decisions are primarily driven not by analysts’ efforts to signal their ability but mostly by an accuracy-publicity trade-off faced by analysts’ employers. Long-horizon forecasts generate publicity for the brokerage but have low accuracy. Sell-side analysts who work for brokerages where a larger fraction of revenue comes from trading fees and that value publicity are more likely to reveal their long-horizon forecasts, consistent with long-horizon forecasts attracting new clients. Analysts who issue long-horizon forecasts and work for brokerages that value publicity are less likely to lose their jobs but also less likely to move to top brokerages.

Keywords: Analyst Forecasts, Analyst Career Outcomes, Publicity Incentives, Forecast Horizon, Sell-side analysts