Does past success lead analysts to become overconfident?

Gilles Hilary and Lior Menzly
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Lior Menzly: university of chicago - booth school of business - University of Chicago

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Abstract: This paper provides evidence that analysts who have predicted earnings more accurately than the median analyst in the previous four quarters tend to be simultaneously less accurate and further from the consensus forecast in their subsequent earnings prediction. This phenomenon is economically and statistically meaningful. The results are robust to different estimation techniques and different control variables. Our findings are consistent with an attribution bias that leads analysts who have experienced a short-lived success to become overconfident in their ability to forecast future earnings.

Keywords: Cognition; Human factor; Psychology; Bias; Statistical analysis; Profitability; Forecasting; Median; Facteur humain; Psychologie; Erreur systématique; Analyse statistique; Rentabilité; Prévision; Médiane (search for similar items in EconPapers)
Date: 2006-04-03
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Citations: View citations in EconPapers (74)

Published in Management Science, 2006, Vol.52, n°4, pp. 489-500. ⟨10.1287/mnsc.1050.0485⟩

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Journal Article: Does Past Success Lead Analysts to Become Overconfident? (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00482318

DOI: 10.1287/mnsc.1050.0485

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