Brokerage Firm Analysts

Abstract

This article reexamines the relationship between analysts’ forecast accuracy and brokerage firm affiliation. The lowest individual forecast is found to be more accurate than either the mean of all contemporaneous forecasts or the mean of all contemporaneous forecasts by large brokerage firms, and large brokerage firm analysts are more accurate only when their forecasts are lower than those of small brokerage firms. The lower the small brokerage firm forecasts relative to large brokerage firm forecasts, the more forecast accuracy can be improved by incorporating small brokerage firm forecasts. The conclusion is that an analyst's expected forecast accuracy is more closely related to whether that analyst's forecast is lower or higher than other analysts’ forecasts than to the analyst's brokerage firm affiliation.