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The Impact of Competition on Analysts’ Forecasts: A Simple Agent-Based Model

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Abstract

This paper builds an agent-based model to study the impact of analyst competition on analyst optimism. Two strategies (a catering strategy and a pressure strategy) are used to model analysts conflicts of interest between listed corporations and institutional clients. The finding suggests that the relationship between competition and analyst optimism is nonlinear. Low-level competition generates more analyst unbiased forecasts. However, the condition of no competition or high-level competition generates more analyst optimistic forecasts. The empirical test also confirms that analysts issue less biased earnings forecasts under the condition of low-level competition.

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Author information

Authors and Affiliations

  1. College of Management and Economics, Tianjin University, Tianjin, 300072, China

    Jin Zhang, Xiong Xiong & Xu Feng

  2. School of Economics, Tianjin University of Commerce, Tianjin, 300134, China

    Yahui An

Authors
  1. Jin Zhang
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  2. Xiong Xiong
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  3. Yahui An
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  4. Xu Feng
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Corresponding author

Correspondence to Yahui An.

Additional information

This research was supported by the National Natural Science Foundation of China under Grant Nos. 71871157, 71790594 and 71532009, and the Major project of Tianjin Education Commission under Grant No. 2018JWZD47.

This paper was recommended for publication by Editor WANG Shouyang.

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Zhang, J., Xiong, X., An, Y. et al. The Impact of Competition on Analysts’ Forecasts: A Simple Agent-Based Model. J Syst Sci Complex 33, 1980–1996 (2020). https://doi.org/10.1007/s11424-020-9006-2

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  • DOI: https://doi.org/10.1007/s11424-020-9006-2

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