Analyst Incentives

Abstract

Analyst forecasts have been shown to reflect substantial behavioral biases and predict a number of macroeconomic phenomena. While we typically treat reported forecasts as statistical expectations, under uncertainty the reported point estimate will be sensitive to the payoff structure facing the forecaster. Using data on careers from LinkedIn, I describe the incentive structures faced by analysts, shedding light the extent to which pay and career success are tied to performance. Further, I extend a causal estimator to identify credible counterfactual forecasts and provide tentative causal evidence of the relationship between forecast errors and promotions.