Surprise! Wall Street Analysts Are Too Optimistic

Wall Street analysts — the ones who predict how stocks will perform — are habitually overconfident.

Everybody knows this.

Still, this graph that Harvard Business Review published today, based on data from McKinsey Quarterly, is worth a look.

It shows that analysts' projections almost always overestimate the growth of corporate profits. On average, over the past 25 years, analysts predicted that the earnings of companies in the S&P 500 would rise by 13% per year. Instead, they rose by 7% per year.

hbr
(HBR/McKinsey)

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