Investor Learning About Analysts Ability
Coauthor(s): Qi Chen, Jennifer Francis.
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Bayesian learning implies decreasing weights on prior beliefs and increasing weights on the
accuracy of the analyst?s past forecast record, as the number of forecast errors comprising her
forecast record (its length) increases. Consistent with this model of investor learning, empirical
tests show that investors? reactions to forecast news are increasing in the product of the
accuracy and length of analysts? forecast records. Moreover, the Bayesian learning predicted
by our model is more descriptive of investor reactions than is a static model which predicts
that investors? responses condition only on the prior accuracy of the analyst.
Source: Journal of Accounting and Economics
Jiang, Wei, Qi Chen, and Jennifer Francis. "Investor Learning About Analysts Ability." Journal of Accounting and Economics 39, no. 1 (2005): 3-24.