The Impact of Competition on Analysts’ Forecasts: A Simple Agent-Based Model

ZHANG Jin · XIONG Xiong · AN Yahui · FENG Xu

Journal of Systems Science & Complexity ›› 2020, Vol. 33 ›› Issue (6) : 1980-1996.

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PDF(440 KB)
Journal of Systems Science & Complexity ›› 2020, Vol. 33 ›› Issue (6) : 1980-1996. DOI: 10.1007/s11424-020-9006-2

The Impact of Competition on Analysts’ Forecasts: A Simple Agent-Based Model

  • ZHANG Jin · XIONG Xiong · AN Yahui · FENG Xu
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Abstract

This paper builds an agent-based model to study the impact of analyst competition on analyst optimism. Two strategies (a catering strategy and a pressure strategy) are used to model analysts conflicts of interest between listed corporations and institutional clients. The finding suggests that the relationship between competition and analyst optimism is nonlinear. Low-level competition generates more analyst unbiased forecasts. However, the condition of no competition or high-level competition generates more analyst optimistic forecasts. The empirical test also confirms that analysts issue less biased earnings forecasts under the condition of low-level competition.

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ZHANG Jin · XIONG Xiong · AN Yahui · FENG Xu. The Impact of Competition on Analysts’ Forecasts: A Simple Agent-Based Model. Journal of Systems Science and Complexity, 2020, 33(6): 1980-1996 https://doi.org/10.1007/s11424-020-9006-2
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