Buy-Side vs. Sell-Side Analysts' Earnings Forecasts

Boris  Groysberg; Paul M. Healy; Craig James Chapman

Article | Financial Analysts Journal | July – August 2008

Buy-Side vs. Sell-Side Analysts' Earnings Forecasts

by Boris Groysberg, Paul M. Healy and Craig James Chapman

Abstract

We compare the earnings forecast performance of analysts at a large buy-side firm to that of sell-side analysts. Our tests show that the buy-side firm analysts make more optimistic and less accurate forecasts than their counterparts on the sell-side. These performance differences appear to be partially explained by the buy-side's higher retention of poor-performing analysts and by differences in performance benchmarks used to evaluate buy- and sell-side analysts.

Keywords: Motivation and Incentives; Business Earnings; Forecasting and Prediction; Performance Effectiveness;

Format: Print

15 pages

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Citation:

Groysberg, Boris, Paul M. Healy, and Craig James Chapman. "Buy-Side vs. Sell-Side Analysts' Earnings Forecasts." Financial Analysts Journal 64, no. 4 (July–August 2008): 25 – 39.

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Buy-Side vs. Sell-Side Analysts' Earnings Forecasts

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