The Timing of AnalystsEarnings Forecasts and InvestorsBeliefs1

The literature assumes that the order and timing of analysts’earnings forecasts are determined exogenously. Ignoring strategic timing decisions of analysts may lead to inconsistent estimates of investors’beliefs. The paper analyzes the equilibrium timing strategies for analysts, and derives the consistent estimates of investors’beliefs. I follow the literature in assuming that analysts care foremost about the accuracy of their forecasts, but in some cases may have an incentive to bias their forecasts. I further assume that investors reward early forecasting analysts. The paper introduces a timing game with two analysts and derives its unique subgame perfect equilibrium in pure strategies. The equilibrium has two patterns: either the times of the analysts’ forecasts cluster, or there is separation in time of the forecasts. More precise private signals of the analysts induces earlier forecasts, and increases the likelihood that the analysts’forecasts will cluster in time. The second part of the paper presents an algorithm for calculating the consistent investors’beliefs following an analyst’s forecasts (for N analysts). It shows that the mean of investors’beliefs is a weighted average of all the forecasts, where the weights are determined according to the recency of each forecast, the precision of the private signal of each analyst, and the precision of the investors beliefs about the analyst’s bias.