Bold Recommendation, Analyst Coverage, and Stock Return

If all analysts have access to the same public information, why would some analysts deviate from the “herd” and issue “bold” recommendations? Is boldness in recommendation a signal of overconfidence or higher ability? We find that it is more profitable to trade based on bold recommendations for firms with low analyst coverage, compared with firms with medium and high coverage. Herding recommendations are less profitable than bold recommendations for firms with low analyst coverage. It appears that some analysts strategically bias their earnings forecast (resulting in less accuracy) so that their recommendations are more profitable.