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How do financial analysts and equity salespeople perceive and cope with uncertainty?

Research output: Contribution to conference - Without ISBN/ISSN Conference paperpeer-review

Publication date10/06/2017
Number of pages51
<mark>Original language</mark>English
Event2017 Behavioural Finance Working Group Conference - Queen Mary University of London, London, United Kingdom
Duration: 12/06/201713/06/2017


Conference2017 Behavioural Finance Working Group Conference
CountryUnited Kingdom
Internet address


Financial analysts have received considerable scholarly attention regarding their forecasting process and accuracy in the company valuations for fund manager clients, which has unearthed biases and errors. The identification of these biases and errors does not explain how analysts make sense of and cope with the uncertainty that surround their long-term company value and share price forecasts. Moreover, hardly anything has been said in this line of research about the role of equity salespeople in the analysts’ long-term company valuations and investment advice for fund managers. This paper demonstrates that for analysts, uncertainty happens in relation to the information and knowledge that are not directly associated with the intrinsic and comparative company valuation techniques for the long-term. This implies that there are actors in the market who do not solely base their judgements and decisions on the information related to the intrinsic and comparative valuation of companies for the long-term. Analysts are dismissive of such short-term uncertainty because of the fund manager client demand for the analyst output that is based on the intrinsic and comparative valuation of companies for the long-term. For the same reason, salespeople, whose main task is marketing the analyst output to fund managers and generating brokerage fees, do not meaningfully question the analysts’ knowledge and practice in the face of short-term uncertainty surrounding the analysts’ forecasts.