Analysts keep getting it wrong

Equity Analysts: Still Too Bullish in McKQ makes depressing, if unsurprising reading. Analysts continue a decades-long tendency to forecast nearly double the profit growth that actually follows, and go most wrong when they most need to get it right – when boom times falter. CEOs get beaten over the head with these forecasts, and mess up business in their efforts to hit stupidĀ targets, so this is of more than academic interest. It is interesting to note, then, that the Chartered Financial Analyst Institute now boasts nearly 100,000 qualified members world-wide, and that its Charter Program is regarded by the Economist as “the gold standard among investment analysis designations”. Interestingly, nowhere in this three-year program of study is there any requirement for its graduates to understand anything about strategic analysis of a business and its market environment. Nor is there any mention of how strategic management affects financial performance (seeĀ  http://www.cfainstitute.org/cfaprog/courseofstudy/topic.html). How, then, are they likely to come up with realistic forecasts? The CFA Institute has long known of this hole in their training, but interest in fixing it seems slow.

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