Analyst Forecast Bundling

Michael Drake (), Peter Joos (), Joseph Pacelli () and Brady Twedt ()
Additional contact information
Michael Drake: Brigham Young University, Provo, Utah 84602
Peter Joos: INSEAD, 138676 Singapore, Singapore
Joseph Pacelli: Indiana University, Bloomington, Indiana 47405
Brady Twedt: University of Oregon, Eugene, Oregon 97403

Management Science, 2020, vol. 66, issue 9, 4024-4046

Abstract: Changing economic conditions over the past two decades have created incentives for sell-side analysts to both provide their institutional clients tiered services and to streamline their written research process. One manifestation of these changes is an increased likelihood of analysts’ issuing earnings forecasts for multiple firms on the same day. We identify this bundling property and show that bundling has increased steadily over time. We provide field evidence that the practice is a cost-saving measure, a natural by-product of analysts focusing on thematic research, and a reflection of forecast updating that occurs in advance of important events. Our empirical analyses show that bundled forecasts are less accurate, less bold, and less informative to investors than nonbundled forecasts. We also find that analysts who produce bundled forecasts provide valuable specialized services to their institutional clients. Our findings ultimately demonstrate that forecast bundling has important implications for the properties of analysts’ forecasts.

Keywords: analysts; earnings forecasts; forecast accuracy; forecast bundling (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (4)

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