Social learning and analyst behavior

Alok Kumar, Ville Rantala and Rosy Xu

Journal of Financial Economics, 2022, vol. 143, issue 1, 434-461

Abstract: This study examines whether sell-side equity analysts engage in “social learning” in which their earnings forecasts for certain firms are influenced by the forecasts and outcomes of “peer” analysts associated with other firms in their respective portfolios. We find that analyst optimism is negatively correlated with recent forecast errors, by peers, on other firms in the analyst's portfolio. An analyst is also more likely to issue “bold” forecasts when peers recently issued similar forecasts for other portfolio firms. Analysts learn more from peers with similar personal characteristics. Overall, social learning benefits analysts and improves their forecast accuracy.

Keywords: Sell-side equity analysts; Social learning; Bold forecasts; Forecast accuracy (search for similar items in EconPapers)
JEL-codes: G14 G24 G41 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:143:y:2022:i:1:p:434-461

DOI: 10.1016/j.jfineco.2021.06.011

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