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Analyzing the Analysts: Career Concerns and Biased Earnings Forecasts

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  • Harrison Hong

    (Stanford Business School,)

  • Jeffrey D. Kubik

    (Syracuse University)

Abstract

We examine security analysts' career concerns by relating their earnings forecasts to job separations. Relatively accurate forecasters are more likely to experience favorable career outcomes like moving up to a high-status brokerage house. Controlling for accuracy, analysts who are optimistic relative to the consensus are more likely to experience favorable job separations. For analysts who cover stocks underwritten by their houses, job separations depend less on accuracy and more on optimism. Job separations were less sensitive to accuracy and more sensitive to optimism during the recent stock market mania. Brokerage houses apparently reward optimistic analysts who promote stocks. Copyright 2003 by the American Finance Association.

Suggested Citation

  • Harrison Hong & Jeffrey D. Kubik, 2003. "Analyzing the Analysts: Career Concerns and Biased Earnings Forecasts," Journal of Finance, American Finance Association, vol. 58(1), pages 313-351, February.
  • Handle: RePEc:bla:jfinan:v:58:y:2003:i:1:p:313-351
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