Question

The Journal of Accounting Research (March 2008) published a study on

relationship incentives and degree of optimism among analysts’ forecasts. Participants were

analysts at either a large or small brokerage firm who made their forecasts either early or late

in the quarter. Also, some analysts were only concerned with making an accurate forecast,

while others were also interested in their relationship with management. Suppose one of

these analysts is randomly selected. Consider the following events:

A = {The analyst is only concerned with making an accurate forecast},

B = {The analyst makes the forecast early in the quarter},

C = {The analyst is from a small brokerage firm}.

For each of the following, describe each of the events in terms of unions, intersections and

complements of events A, B and C.

a) The analyst makes an early forecast and is only concerned with accuracy.

(b) The analyst is not only concerned with accuracy.

(c) The analyst is from a small brokerage firm or makes an early forecast.

(d) The analyst makes a late forecast and is not only concerned with accuracy.

Answer 1