Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • March 2011
  • Article
  • Journal of Economic Behavior & Organization

Do Sell-Side Stock Analysts Exhibit Escalation of Commitment?

By: John Beshears and Katherine L. Milkman
  • Format:Print
ShareBar

Abstract

This paper presents evidence that when an analyst makes an out-of-consensus forecast of a company's quarterly earnings that turns out to be incorrect, she escalates her commitment to maintaining an out-of-consensus view on the company. Relative to an analyst who was close to the consensus, the out-of-consensus analyst adjusts her forecasts for the current fiscal year's earnings less in the direction of the quarterly earnings surprise. On average, this type of updating behavior reduces forecasting accuracy, so it does not seem to reflect superior private information. Further empirical results suggest that analysts do not have financial incentives to stand by extreme stock calls in the face of contradictory evidence. Managerial and financial market implications are discussed.

Keywords

Escalation Of Commitment; Stock Market; Updating; Behavioral Economics; Motivation and Incentives; Behavior; Consumer Behavior; Financial Markets; Forecasting and Prediction

Citation

Beshears, John, and Katherine L. Milkman. "Do Sell-Side Stock Analysts Exhibit Escalation of Commitment?" Journal of Economic Behavior & Organization 77, no. 3 (March 2011): 304–317.
  • Find it at Harvard
  • Read Now

About The Author

John Beshears

Negotiation, Organizations & Markets
→More Publications

More from the Authors

    • March 2022
    • Faculty Research

    A Behavioral Science Perspective on Motivation and Incentives

    By: John Beshears and Ashley Whillans
    • February 2022
    • Faculty Research

    Stoy Foods

    By: John Beshears
    • February 2022
    • Faculty Research

    Magrabi: Fulfilling the Vision for the Future

    By: John Beshears
More from the Authors
  • A Behavioral Science Perspective on Motivation and Incentives By: John Beshears and Ashley Whillans
  • Stoy Foods By: John Beshears
  • Magrabi: Fulfilling the Vision for the Future By: John Beshears
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Digital Accessibility
Copyright © President & Fellows of Harvard College