Abstract
This paper examines the real effects of outlier opinions in the context of extreme analyst optimism. We show that the arrival of an extremely optimistic forecast raises the optimism of peer analysts and generates stronger stock price reactions. Firms with more extreme outlier forecasts conduct more earnings management. Outlier forecasts are unlikely driven by private information or conflict of interest arising from brokerage firm’s investment banking incentive. Instead, career incentives are likely the cause for an analyst to voice extreme opinions.
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