Are Multiple Analyst Earnings Forecasts Better Than the Single Forecast?
Abstract (Via Ning Du & McEnro)
This study investigates the impact of multiple information sources. Specifically, we examine whether single and multiple earnings forecasts may differentially influence investors’ expectations. We focus on two main aspects of investors’ expectations: (a) predictions of future EPS and (b) subjective confidence about their own predictions. We conduct an experiment where we hold information content constant and ask participants to evaluate multiple earnings forecasts or a single earnings estimate. Results from the experiment suggest that multiple information sources improve participants’ confidence, and participants are most confident when they receive multiple earnings forecasts with no variability. However, their confidence diminishes when variability in the multiple forecasts increases. Evidence from this study indicates that multiple information sources outperform the single source only when multiple reports have highly consistent information.