Analyst Decision Fatigue and Heuristic Earnings Forecasts

Summary

This research summary examines whether sell-side analysts’ earnings forecasts change as they issue more forecasts during a day. It frames decision fatigue as a shift from deliberate reasoning toward faster, more heuristic judgments. Using analyst forecast data from 2002 to 2015, the underlying study relates the order of each analyst’s forecasts to forecast accuracy, herding, repeated forecasts, rounding, and market responses to forecast revisions.

The reported results associate later forecasts with lower accuracy and stronger herding; analysts are also more likely to repeat earlier estimates, while rounding effects appear mainly for a subset of earnings-per-share values. Market reactions to revisions are described as weaker after analysts have issued more forecasts. The summary reports robustness checks that account for analyst, firm, and timing patterns, but the evidence is observational: forecast order is only a proxy for fatigue, and analysts may prioritize or sequence companies for other reasons. The findings therefore suggest a behavioral relationship rather than proving that fatigue causes forecast errors or market effects.

Key ideas

• The study uses the number and sequence of an analyst’s daily forecasts as a proxy for decision fatigue.
• Later forecasts are associated with lower accuracy and greater similarity to existing consensus estimates.
• Analysts issuing more forecasts are more likely to repeat earlier estimates, with rounding effects varying across earnings ranges.
• Market responses to earnings forecast revisions are reported to weaken as the analyst’s daily forecast count rises.
• Nonrandom company ordering remains a possible alternative explanation for the observed relationships.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.