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Publications
Publications
  • July – August 2011
  • Article
  • Financial Analysts Journal

What Factors Drive Analyst Forecasts?

By: Boris Groysberg, Paul Healy, Nitin Nohria and George Serafeim
  • Format:Print
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Abstract

A firm's competitive environment, its strategic choices, and its internal capabilities are considered important determinants of its future performance. Yet there is little evidence on whether analysts' forecasts of firm performance actually reflect any of these factors and which are considered most important. We use survey data from 967 analysts ranking 837 companies to judge how their forecasts are related to evaluations of firms' industry competitiveness, strategic choices, and internal capabilities. Forecasts are generally associated with many of the factors that money managers rate as important in their assessments of analyst contributions, including industry growth and competitiveness, low-price strategy, strategy execution, top management quality, innovation, and performance-driven culture. We also find wide variation across variables for ratings consistency among analysts covering the same firm. On average, consistency is higher for sell-side than buy-side analysts, consistent with sell-side analysts facing greater incentives to herd.

Keywords

Competition; Forecasting and Prediction; Industry Growth; Judgments; Performance; Valuation; Price; Quality; Innovation and Invention; Organizational Culture; Competency and Skills; Surveys

Citation

Groysberg, Boris, Paul Healy, Nitin Nohria, and George Serafeim. "What Factors Drive Analyst Forecasts?" Financial Analysts Journal 67, no. 4 (July–August 2011).
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About The Authors

Boris Groysberg

Organizational Behavior
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Paul M. Healy

Accounting and Management
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Nitin Nohria

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George Serafeim

Accounting and Management
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    Societal and environmental issues are pressing and companies must transform if they intend to remain competitive

    By: Ethan Rouen and Georgios Serafeim
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    Glass Half-Broken: Shattering the Barriers That Still Hold Women Back at Work

    By: Colleen Ammerman and Boris Groysberg
    • March 2021
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    P.F. Chang's

    By: Ashish Nanda, Nitin Nohria and Margaret Cross
More from the Authors
  • Societal and environmental issues are pressing and companies must transform if they intend to remain competitive By: Ethan Rouen and Georgios Serafeim
  • Glass Half-Broken: Shattering the Barriers That Still Hold Women Back at Work By: Colleen Ammerman and Boris Groysberg
  • P.F. Chang's By: Ashish Nanda, Nitin Nohria and Margaret Cross
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