Analysts' Weighting of Private and Public Information

Posted: 14 Apr 2005

See all articles by Qi Chen

Qi Chen

Duke University - Fuqua School of Business

Wei Jiang

Emory University Goizueta Business School; ECGI; NBER

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Using both a linear regression method and a probability-based method, we find that on average analysts place larger than efficient weights on (i.e., they over-weight) their private information when they forecast corporate earnings. We also find that analysts over-weight more when issuing forecasts more favorable than the consensus, and over-weight less, and may even under-weight, private information when issuing forecasts less favorable than the consensus. Further, the deviation from efficient weighting increases when the benefits from doing so are high or when the costs of doing so are low. These results suggest that analysts' incentives play a larger role in misweighting than their behavioral biases.

Keywords: analyst forecast, efficient weighting, over- and under-weighting, optimistic weighting

JEL Classification: G14, G24, G29, J44

Suggested Citation

Chen, Qi and Jiang, Wei, Analysts' Weighting of Private and Public Information. Available at SSRN:

Qi Chen

Duke University - Fuqua School of Business ( email )

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Wei Jiang (Contact Author)

Emory University Goizueta Business School ( email )

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