Team Earnings Forecasting
35 Pages Posted: 22 Sep 2005 Last revised: 1 Apr 2014
Date Written: January 2008
While brokerage houses use both teams of sell-side analysts and individual analysts to conduct earnings research, there is no empirical research examining if teams and individuals differ with regard to their forecasting performance or purpose, and if so, how and why. We first examine the most-often researched dimension of forecasting performance, earnings forecast accuracy, and we show that teams are less accurate than individual analysts in general and their own individual team members in particular. We conjecture that teams focus their efforts on an alternative dimension of forecasting performance, timeliness, and we show that team forecasts are timelier than those of individual analysts in general and their own individual team members in particular. Consistent with the notion that teams trade-off forecast accuracy for timeliness to comply with a market research demand, we show that team forecast revisions are associated with larger market responses than those of individuals. Finally, we shed light on the nature of team assignments by documenting that the firms teams follow are in greater financial distress (representing a greater need for timely information) and larger (representing a larger forecasting task).
Keywords: Teams, Earnings forecasts, Accuracy, Timeliness
JEL Classification: G29, M41, J33
Suggested Citation: Suggested Citation