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