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Analysts' earnings forecasts: coexistence and dynamics of overconfidence and strategic incentives

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  • Katrien Bosquet
  • Peter de Goeij
  • Kristien Smedts

Abstract

This paper formulates a two-stage model to capture the decision process of financial analysts when issuing earnings forecasts. Our model extends the model of Chen and Jiang [(2005). Analysts' weighting of private and public information. Review of Financial Studies , 19 (1), 319-355], by allowing for a distortion of forecasts independent of whether an analyst has private information. Using quarterly earnings forecasts, we provide empirical evidence on the coexistence of overconfidence and strategic incentives. Financial analysts overweight their private information and at the same time strategically inflate their forecast.

Suggested Citation

  • Katrien Bosquet & Peter de Goeij & Kristien Smedts, 2015. "Analysts' earnings forecasts: coexistence and dynamics of overconfidence and strategic incentives," Accounting and Business Research, Taylor & Francis Journals, vol. 45(3), pages 307-322, April.
    • Handle: RePEc:taf:acctbr:v:45:y:2015:i:3:p:307-322
    DOI: 10.1080/00014788.2015.1009359
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    Cited by:

    1. David Ashton & Chau (Ruby) Trinh, 2018. "Evaluating the information content of earnings forecasts," Accounting and Business Research, Taylor & Francis Journals, vol. 48(6), pages 674-699, September.

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