We study how sell-side stock analysts whose views on a company’s future differ from those of their peers update their predictions in response to new information. When an analyst makes an out-of-consensus forecast for a company’s quarterly earnings and turns out to be incorrect, we find that the analyst stubbornly persists in maintaining her out-of-consensus view on the company. Relative to an analyst who was close to the consensus, the out-of-consensus analyst adjusts her forecasts for subsequent quarters less in the direction of the earnings surprise. On average, this stubbornness reduces forecasting accuracy, so it does not seem to reflect superior private information. We discuss the factors that are likely to drive stubbornness, including the possibility that the rewards for correct out-of-consensus forecasts are so large that analysts have an incentive to stand by extreme stock calls even in the face of contradictory evidence.
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