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Why Do Analysts Disagree ?


  • Jean-Sébastien Michel
  • J. Ari Pandes


This paper finds that about one-quarter of analyst forecast dispersion and one-half of the dispersion-return relationship between 1985 and 2012 are explained by analyst overconfidence. In particular, the firm’s analyst overconfidence mean and analyst overconfidence dispersion are the two most significant determinants of analyst forecast dispersion. Together, these two variables capture 77% of the explained variation in analyst forecast dispersion when all known determinants are considered. With respect to the dispersion-return relationship, the analyst forecast dispersion predicted by analyst overconfidence leads to a monthly hedging portfolio profit of 0.35% compared to a profit of 0.37% for the analyst forecast dispersion not predicted by analyst overconfidence.

Suggested Citation

  • Jean-Sébastien Michel & J. Ari Pandes, 2013. "Why Do Analysts Disagree ?," Cahiers de recherche 1305, CIRPEE.
  • Handle: RePEc:lvl:lacicr:1305

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    Analyst Overconfidence; Self-Attribution Bias; Analyst Forecast Dispersion; Stock Returns;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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