Survey on forecast bias (analysts and earnings)^*

* Accepted by Yue Ma upon recommendation by Junbo Wang

Abstract

This literature review surveys some of the main topics regarding analysts and earnings. My primary focus is on analyst forecast bias by highlighting the various incentives, biases, and weightings that can influence the accuracy of analysts’ forecasts. I then demonstrate some of the factors that can influence analysts’ overall accuracy, specifically their career concerns, the tendency for analysts to herd, and information weighting. I study the effect of new regulations and reforms passed in the early 2000s on analysts, brokerage house earnings, and forecast bias.

Keywords:

• Analysts and earnings
• forecast bias
• information weighting
• analyst herd
• career concerns