Volume 24 Issue 1 (January-March 2008)

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The financial analyst forecasting literature: A taxonomy with suggestions for further research

Ramnath, S. , Rock, S. , Shane, P.
Pages 34-75

This paper develops a taxonomy of research examining the role of financial analysts in capital markets. The paper builds on the perspectives provided by Schipper [Schipper, K. (1991). Analysts' forecasts. Accounting Horizons, 5, 105-131] and Brown [Brown, L. (1993). Earnings forecasting research: Its implications for capital markets research. International Journal of Forecasting, 9, 295-320]. We categorize papers published since 1992, describe the research questions addressed, and suggest avenues for further research in seven broad areas: (1) analysts' decision processes; (2) the nature of analyst expertise and the distributions of earnings forecasts; (3) the information content of analyst research; (4) analyst and market efficiency; (5) analysts' incentives and behavioral biases; (6) the effects of the institutional and regulatory environment (including cross-country comparisons); and (7) research design issues.

Keywords: Earnings forecasting , Financial analysts , Financial markets , Stock price forecasts , Analyst stock recommendations , Analyst research reports , Analyst decision processes , Analysts' incentives , Analyst expertise , Analyst inefficiency , Forecast bias , Financial analyst literature review
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