Analyst forecast accuracy: Do ability, resources, and portfolio complexity matter?

Prior studies have identified systematic and time persistent differences in analystsʹ earnings forecast accuracy, but have not explained why the differences exist. Using the I/B/E/S Detail History database, this study finds that forecast accuracy is positively associated with analystsʹ experience (a surrogate for analyst ability and skill) and employer size (a surrogate for resources available), and negatively associated with the number of firms and industries followed by the analyst (measures of task complexity). The results suggest that analystsʹ characteristics may be useful in predicting differences in forecasting performance, and that market expectations studies may be improved by modeling these characteristics.