Information Acquisition and Disclosure in Forecasting Contests

We study price efficiency of analyst forecasts when competing analysts strategically acquire and disclose information in forecasting contests. In acquiring information, analysts face a tradeoff—while more precise information improves their forecast accuracy and the likelihood of winning the contest, it also increases their conditional signal correlation making differentiation to win the contest harder. In equilibrium, analysts cannot make truthful forecasts if contest rewards are sufficiently high. Increasing contest competitiveness, by scaling up contest rewards: generally, encourages information production, but can discourage information acquisition by the weaker analyst to the point of not acquiring information at all; and reduces price efficiency at higher reward levels. Two ex-ante identical analysts can become differently informed and use opposing forecasting strategies. JEL: D82, D83, M41,