When they are wrong about quarterly earnings forecasts, analysts may stubbornly stick to their erroneous views, a tendency that might contribute to market bubbles and busts, according to research coauthored by John Beshears of the Stanford Graduate School of Business
Like oracles in the stock market, securities analysts come up with earnings estimates that are supposed to signal the worth of a company's stock. But what happens when a company's actual performance proves an analyst's quarterly forecast is wrong?
This piece originally appeared in Stanford Business Insights from Stanford Graduate School of Business. To receive business ideas and insights from Stanford GSB click here: (To sign up: https://www.gsb.stanford.edu/insights/about/emails)