TY - JOUR
T1 - Market demand for conservative analysts
AU - Hugon, Jean
AU - Muslu, Volkan
N1 - Copyright:
Copyright 2010 Elsevier B.V., All rights reserved.
PY - 2010/5
Y1 - 2010/5
N2 - Sell-side analysts, on balance, have incentives to emphasize good company news and downplay the bad, resulting in inefficient forecasts. We conjecture that this behavior generates a demand for forecasts from conservative analysts who unwind this pattern, at least in part, resulting in more efficient forecasts. To investigate, we introduce a measure of analyst conservatism and assess the market reaction to analysts' forecast revisions conditioned on their past levels of conservatism. We find a stronger market reaction to forecast revisions by more conservative analysts, and that this result is heightened for companies with greater institutional investor following.
AB - Sell-side analysts, on balance, have incentives to emphasize good company news and downplay the bad, resulting in inefficient forecasts. We conjecture that this behavior generates a demand for forecasts from conservative analysts who unwind this pattern, at least in part, resulting in more efficient forecasts. To investigate, we introduce a measure of analyst conservatism and assess the market reaction to analysts' forecast revisions conditioned on their past levels of conservatism. We find a stronger market reaction to forecast revisions by more conservative analysts, and that this result is heightened for companies with greater institutional investor following.
KW - Analysts
KW - Conservatism
KW - Earnings forecasts
KW - Market reaction
UR - http://www.scopus.com/inward/record.url?scp=77950949927&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=77950949927&partnerID=8YFLogxK
U2 - 10.1016/j.jacceco.2010.01.001
DO - 10.1016/j.jacceco.2010.01.001
M3 - Article
AN - SCOPUS:77950949927
SN - 0165-4101
VL - 50
SP - 42
EP - 57
JO - Journal of Accounting and Economics
JF - Journal of Accounting and Economics
IS - 1
ER -