Social learning and analyst behavior
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AbstractThis 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.
Acceptance Date21/01/2021
All Author(s) ListAlok Kumar, Ville Rantala, Rosy Xu
Journal nameJournal of Financial Economics
Year2022
Month1
Volume Number143
Issue Number1
PublisherElsevier
Pages434 - 461
ISSN0304-405X
LanguagesEnglish-United States
Keywordssell-side equity analysts, social learning, bold forecasts, forecast accuracy
