Abstract: Investors are slow to learn that security analysts do not always mean what they say. What investors hear is not always what analysts mean. This is partly because analysts do not always mean what they say. They frequently say “hold” but mean “sell, ” or say “buy” when they believe “hold. ” As a result, Wall Street analysts came under fire after the collapse of the 1990s technology bubble. Major brokerage firms were fined. Individual security analysts were barred from the industry for life. Moreover, analysts are prone to bias and error. And some managers and investors appear to exhibit frame dependence as well, with reference point effects in the earnings game. However, the main behavioral bias seems to be excessive optimism.

Keywords: earnings forecasts, frame dependence, optimism, pessimism, recommendations, reference points,