Why the Best Analysts Are Not Necessarily the Most Accurate

By Covering Business     March 14, 2012

A common accolade showered on rising equity analysts is that they are among the most accurate in their field. However, there is a case to be made that the accuracy of analyst’s predictions is less important than the information investors can glean from it.

A forthcoming article in the Journal of Finance suggests that consistency in an equity analyst’s predictions is significantly more useful to investors than accuracy. The researchers argue that an analyst who is consistently off on his earnings estimates by some static amount is a more valuable resource to investors than an analyst who is closer to the mark but overshoots or undershoots seemingly at random.

Read the full article (PDF).

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