Publication Type
Working Paper
Publication Date
9-2005
Abstract
Prior research on financial analysts’ consensus earnings forecast errors has tended to explore either incentives-based or inefficient information use-based explanations for the properties of the analysts’ forecast errors. This has limited our understanding of financial analysts’ expectation formation process as incentives and cognitive biases are likely to simultaneously affect the properties of the analysts’ consensus forecast errors. Our main contribution is in separating these two effects. In particular, using consensus quarterly earnings forecast data, we document that analysts have asymmetric loss function and that they do not fully use information about past earnings and forecast errors in minimizing their expected loss.
Discipline
Accounting | Finance and Financial Management
Research Areas
Financial Intermediation and Information
Citation
Markov, Stanimir and TAN, Min Yen.
Separating the Effects of Asymmetric Incentives and Inefficient Use of Information on Financial Analysts' Consensus Earnings Forecast Errors. (2005). Research Collection School Of Accountancy.
Available at: https://ink.library.smu.edu.sg/soa_research/166
Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.