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Market demand for conservative analysts

  • Hugon, Artur
  • Muslu, Volkan
Registered author(s):

    Sell-side analysts, on balance, have incentives to emphasize good company news and downplay the bad, resulting in inefficient forecasts. We conjecture that this behavior generates a demand for forecasts from conservative analysts who unwind this pattern, at least in part, resulting in more efficient forecasts. To investigate, we introduce a measure of analyst conservatism and assess the market reaction to analysts' forecast revisions conditioned on their past levels of conservatism. We find a stronger market reaction to forecast revisions by more conservative analysts, and that this result is heightened for companies with greater institutional investor following.

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    File URL: http://www.sciencedirect.com/science/article/B6V87-4Y70C30-1/2/e1225de07a0226e822cd3c713f9f8055
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    Article provided by Elsevier in its journal Journal of Accounting and Economics.

    Volume (Year): 50 (2010)
    Issue (Month): 1 (May)
    Pages: 42-57

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    Handle: RePEc:eee:jaecon:v:50:y:2010:i:1:p:42-57
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