Market demand for conservative analysts

Artur Hugon and Volkan Muslu

Journal of Accounting and Economics, 2010, vol. 50, issue 1, 42-57

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.

Keywords: Analysts; Conservatism; Earnings; forecasts; Market; reaction (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:50:y:2010:i:1:p:42-57

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