Associate Professor of Accounting and Control
Financial Analysts; Earnings Forecasts; Forecast Bundling; JEL Classification: G14, G24
Changing economic conditions over the past two decades have created incentives for sell-side analysts to both provide their institutional clients tiered services and to streamline their written research process. One manifestation of these changes is an increased likelihood of analysts’ issuing earnings forecasts for multiple firms on the same day.The authors identify this bundling property and show that bundling has increased steadily over time. They provide field evidence that the practice is a cost-saving measure, a natural byproduct of analysts focusing on thematic research, and a reflection of forecast updating that occurs in advance of important events.The empirical analyses show that bundled forecasts are less accurate, less bold, and less informative to investors than non-bundled forecasts. the authors also find that analysts who produce bundled forecasts provide valuable specialized services to their institutional clients. The findings ultimately demonstrate that forecast bundling has important implications for the properties of analysts’ forecasts.