The Power of Collaboration: How Collaboration Depth Shapes Forecast Performance in Analyst Teams

Abstract

This paper investigates how collaboration depth influences forecast performance in analyst teams. Based on Chinese A-share market data from 2007 to 2022, we find that teams with deeper collaboration experience produce more accurate and timely forecasts. Cross-sectional analyses indicate that the effect on forecast accuracy becomes more significant when the lead analyst has more firm-specific experience, there is greater gender diversity in the analyst teams, and when the firm has high information opacity. For timeliness, the effect is stronger in teams with high education diversity and in firms with highly volatile revenues, but weaker in teams with more star analysts. Furthermore, the positive effect of collaboration depth on forecast accuracy is more significant in brokerage firms with stronger collaboration cultures. However, deeper collaboration among analyst teams is also associated with increased herding behavior. These findings have practical implications for brokers and analysts.