Do Security Analysts Improve Their Performance with Experience?

Abstract

This article discusses the authors' study designed to determine if sell-side security analysts generate more accurate quarterly earnings forecasts and more profitable stock recommendations as their experience following a specific firm increases. The authors measure firm specific experience as the number of prior quarters for which the analyst has issued an earnings forecast for the firm. They examine forecast accuracy in time series. The study's results have implications for the use of analyst earnings forecasts as proxies for the market's expectation of earnings.