Market demand for conservative analysts

Jean Hugon, Volkan Muslu

Research output: Contribution to journalArticle

17 Citations (Scopus)

Abstract

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.

Original languageEnglish (US)
Pages (from-to)42-57
Number of pages16
JournalJournal of Accounting and Economics
Volume50
Issue number1
DOIs
StatePublished - May 2010

Fingerprint

Market demand
Analysts
Market reaction
Conservatism
Analysts' forecast revisions
Institutional investors
Incentives
Sell-side analysts
Forecast revisions
News

Keywords

  • Analysts
  • Conservatism
  • Earnings forecasts
  • Market reaction

ASJC Scopus subject areas

  • Accounting
  • Economics and Econometrics
  • Finance

Cite this

Market demand for conservative analysts. / Hugon, Jean; Muslu, Volkan.

In: Journal of Accounting and Economics, Vol. 50, No. 1, 05.2010, p. 42-57.

Research output: Contribution to journalArticle

Hugon, Jean ; Muslu, Volkan. / Market demand for conservative analysts. In: Journal of Accounting and Economics. 2010 ; Vol. 50, No. 1. pp. 42-57.
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