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When attention is away, analysts misplay: distraction and analyst forecast performance

Author

Listed:
  • Thomas Bourveau

    (Columbia University)

  • Alexandre Garel

    (Audencia Business School)

  • Peter Joos

    (INSEAD)

  • Arthur Petit-Romec

    (TBS Education)

Abstract

We construct a distraction measure based on extreme industry returns to gauge whether analysts’ attention is away from certain stocks under coverage. We find that temporarily distracted analysts make less accurate forecasts, revise forecasts less frequently, and publish less informative forecast revisions, relative to undistracted analysts. Further, at the firm level, analyst distraction carries real negative externalities by increasing information asymmetry for stocks that suffer from a larger extent of analyst distraction during a given quarter. Our findings thus augment our understanding of the determinants and effects of analyst effort allocation and broaden the literature on distraction and information spillover in financial markets.

Suggested Citation

  • Thomas Bourveau & Alexandre Garel & Peter Joos & Arthur Petit-Romec, 2024. "When attention is away, analysts misplay: distraction and analyst forecast performance," Review of Accounting Studies, Springer, vol. 29(1), pages 916-958, March.
    • Handle: RePEc:spr:reaccs:v:29:y:2024:i:1:d:10.1007_s11142-022-09733-w
    DOI: 10.1007/s11142-022-09733-w
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    More about this item

    Keywords

    Limited attention; Distraction; Effort allocation; Analyst; Forecasts; Information environment;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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