Evidence That Analyst Forecasts Do Not Reflect Their Expectations

摘要

In Evidence That Analyst Forecasts Do Not Reflect Their Expectations, published in the Winter 2018 issue of The Journal of Investing, Haim Mozes of Spring Mountain Capital, LP, presents a study of how the forecasting accuracy of sell-side analysts has changed over time, and concludes that analysts deliberately do not update their estimates with the best information as time gets closer to the earnings release date. While these findings are less relevant to investors with longer holding periods or investment horizons, they are very relevant to investors whose strategies rely on short-term trading around earnings surprises and the related market expectations. It has become more challenging to use analysts' forecasts to determine what earnings expectations are already priced, and strategies based on exploiting earnings surprises have become more difficult to execute. Consequently, if investors cannot discern market expectations, they should forgo strategies based on short-term trading around earnings releases.