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The aim is to explore how anchoring affects analysts' earnings forecast errors over long and short-term horizons.

December 10, 2025Cogent Economics & FinanceOpen Access

Anchoring effect and long-horizon analysts’ forecast errors

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The aim is to explore how anchoring affects analysts' earnings forecast errors over long and short-term horizons.
Investigated the role of E/P and P/B ratios in analysts’ forecasts
Analyzed long-term (12-month) versus short-term forecast horizons
Controlled for additional factors like risk and growth
Found optimistic long-term earnings forecasts for stocks with high E/P and low P/B ratios
Observed pessimistic forecasts for stocks with low E/P and high P/B ratios
Short-term forecasts were not influenced by E/P and P/B ratios when additional information was available

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Findings show anchoring effect leads to forecast errors in long-term earnings predictions by analysts, indicating impact of investment ratios.

Limpaphayom et al. (2025) studied this question.

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Findings show anchoring effect leads to forecast errors in long-term earnings predictions by analysts, indicating impact of investment ratios.