 How (Over) Confident Are Financial Analysts?Ning Du and David V. Budescu Journal of Behavioral Finance, 2018, vol. 19, issue 3, 308-318 Abstract: Extensive research has been devoted to the quality of analysts' earnings forecasts. The common finding is that analysts' forecasts are not very accurate. Prior studies have tended to focus on the mean of forecasts and measure accuracy using various summaries of forecast errors. The present study sheds new light on the accuracy of analysts' forecasts, by measuring how well calibrated these forecasts are. The authors follow the tradition of calibration studies in psychological literature and measure the degree of calibration by the hit rate. They analyze a year's worth of data from the Institutional Brokers Estimate System database, which includes over 200,000 annual earnings forecasts made by over 6,000 analysts for over 5,000 companies. By using different ways to convert analysts' point estimates of earnings into a range of values, the authors establish the bounds that are necessary to determine the hit rates, and examine to what extent the actual earnings announced by the companies are bracketed by these intervals. These hit rates provide a more complete picture of the accuracy of the forecasts. Date: 2018 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:hbhfxx:v:19:y:2018:i:3:p:308-318 Ordering information: This journal article can be ordered from DOI: 10.1080/15427560.2018.1405004 Access Statistics for this article Journal of Behavioral Finance is currently edited by Brian Bruce More articles in Journal of Behavioral Finance from Taylor & Francis Journals |
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