Rationality and analysts' forecast bias

• 成果类型: Article
• 署名作者: Lim, T
• 署名单位: Dartmouth College
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/0022-1082.00329
• 发表日期: 2001
• 页码: 369-385
• 关键词: EARNINGS FORECASTS; INFORMATION; recommendations; INVESTMENT; BEHAVIOR; optimism; MARKET

摘要

This paper proposes and tests a quadratic-loss utility function for modeling corporate earnings forecasting, where financial analysts trade off bias to improve management access and forecast accuracy. Optimal forecasts with minimum expected error are optimistically biased and exhibit predictable cross-sectional variation related to analyst and company characteristics. Empirical evidence from individual analyst forecasts is consistent with the model's predictions. These results suggest that positive and predictable bias may be a rational property of optimal earnings forecasts. Prior studies using classical notions of unbiasedness may have prematurely dismissed analysts' forecasts as being irrational or inaccurate.