How Analysts’ Ability Affects Forecast Timing Under Bias and Uncertainty?

We investigate the analysts timing decisions and the extent to which timing can be a proxy for their ability. We present a model in which forecast accuracy and timing are affected by information uncertainty stemming from (i) the presence of forecast bias and (ii) investors' limited capability to adjust to this bias. We assume that the presence of a bias is inherent in the analysts' objective to maximize their revenue from providing private information to unsophisticated investors. Our analysis contribute to identifying the mechanism by which information uncertainty stemming from biased communication affects the trade-off between timeliness and forecast quality. We find that the optimal forecasting time varies non-monotonically with the analyst's ability to generate new idiosyncratic information as the result of two competing factors: the analyst's incentive to delay the forecast on account of his ability to worth-fully process additional public information versus the incentive to issue the forecast as soon as possible not to impair its value when more information becomes publicly available as time goes by. Both the low and high skill analysts tend to issue their forecast sooner than the analysts with intermediate skills, all the more so the larger the uncertainty about the forecast bias