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Technology Stocks : All About Sun Microsystems
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To: DiViT who wrote (40637)1/19/2001 4:35:22 PM
From: Charles Tutt  Read Replies (3) of 64865
 
The base problem is that people listen to analysts instead of doing their own thinking. That creates the further problem that analysts can move markets, so it can be dangerous to ignore them if you have a short term perspective. Longer term, analysts come and go. Although I don't recall seeing a scientific study of the issue, my guess is that a batting average as high as .500 for an analyst would be extremely rare if evaluated on a time frame that discounted the "self fulfilling prophecy" effect.

I think I also read once that analysts are evaluated as if all predictions were made at the close of the previous day, so it behooves them to downgrade on a down day after they've seen the carnage. E.g. if a stock gaps down 10% at the open, an analyst can "capture" that 10% for his record by downgrading during the day. Even so, I doubt very many bat .500.

JMHO.

Charles Tutt (TM)
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