Market demand for conservative analysts

Jean Hugon, Volkan Muslu

Research output: Contribution to journalArticlepeer-review

27 Scopus citations


Sell-side analysts, on balance, have incentives to emphasize good company news and downplay the bad, resulting in inefficient forecasts. We conjecture that this behavior generates a demand for forecasts from conservative analysts who unwind this pattern, at least in part, resulting in more efficient forecasts. To investigate, we introduce a measure of analyst conservatism and assess the market reaction to analysts' forecast revisions conditioned on their past levels of conservatism. We find a stronger market reaction to forecast revisions by more conservative analysts, and that this result is heightened for companies with greater institutional investor following.

Original languageEnglish (US)
Pages (from-to)42-57
Number of pages16
JournalJournal of Accounting and Economics
Issue number1
StatePublished - May 2010


  • Analysts
  • Conservatism
  • Earnings forecasts
  • Market reaction

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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