The next Brown Bag Seminar is scheduled for Thursday, April 13th, 2017, 11.45-13.30 in seminar room D4.0.039.

Our speaker will be Amir Rubin (Beedie School of Business).

He will give a talk on "

Lured by the Consensus: Pricing Implications of Treating All Analysts as Equal

" (joint with Roni Michaely, Dan Segal and Alexander Vedrashko).

Abstract: We suggest a more accurate earnings forecast than the consensus by classifying analysts into high and low quality (HQ and LQ) categories based on their past forecast accuracy. We find that the market overweighs the information content of the consensus forecast and does not utilize price-relevant information in the forecasts and recommendations of the HQ analysts. The HQ analysts’ recommendation changes and forecast dispersion predict the firm’s stock returns and return volatility next month. Importantly, the PEAD phenomenon is present only when the HQ analysts are relatively uncertain. At the aggregate level, recommendation changes of the HQ analysts predict future industry and market returns, while the consensus recommendation changes do not, and market volatility is higher following periods of greater uncertainty among the HQ analysts. Overall, our results indicate that fixation on the consensus can lead to less accurate forecasts and inefficient prices.