Sell-Side Analysis Most Useful When Most Wrong

Equity analysts work harder when economies and financial markets are slumping. They also have more influence over stocks -- even though their earnings forecasts are less accurate.

Economists Roger K. Loh and Rene M. Stulz, studying analyst reports from 1983 to 2011, concluded that greater uncertainty and career concerns amid recessions and market crises mean projections are tougher to make and prove less accurate. Even so, harder times push investors to rely on them more for guidance and so increase the usefulness of analysis.