Is Cognitive Bias Really Present In Analyst Forecasts The Role Of Investor Sentiment PDF Download
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| Author | : Pilar Corredor |
| Publisher | : |
| Total Pages | : |
| Release | : 2014 |
| Genre | : |
| ISBN | : |
Download Is Cognitive Bias Really Present in Analyst Forecasts? The Role of Investor Sentiment Book in PDF, ePub and Kindle
This paper analyses four key markets within the European context. In this context, where the level of analyst coverage is lower than in the US setting, we aim to ascertain whether the origin of optimism in analyst forecasts in these markets is mainly strategic or whether it also contains an element of cognitive bias. Despite the fact that forecast errors lack the explanatory power to account for a significant percentage of the relationship between market sentiment and future stock returns, our new tests based on selection bias (SB1 and SB2), in conjunction with an analysis of abnormal trading volume, confirm the presence of both cognitive bias and strategic behaviour in analyst forecasts. This shows that, although regulation can reduce analyst optimism bias, the benefits are constrained by the fact that optimism bias is partly associated with cognitive bias.
| Author | : Beverly R. Walther |
| Publisher | : |
| Total Pages | : |
| Release | : 2014 |
| Genre | : |
| ISBN | : |
Download Does Investor Sentiment Affect Sell-Side Analysts' Forecast Bias and Forecast Accuracy Book in PDF, ePub and Kindle
We examine the association between investor expectations and its components and sell-side analysts' short-run quarterly earnings forecast bias and forecast accuracy. To measure investor expectations, we use the Index of Consumer Expectations (ICE) survey and decompose it into the “fundamental” component related to underlying economic factors (FUND) and the “sentiment” component unrelated to underlying economic factors (SENT). We find that analysts are the most optimistic and the least accurate when SENT is higher. Management long-horizon earnings forecasts attenuate the effects of SENT on forecast optimism and forecast accuracy. Analysts are also the most accurate when FUND is higher. Last, the market places more weight on unexpected earnings when SENT is high. These findings suggest that analysts are affected by investor sentiment and the market reacts more strongly to unexpected earnings when analyst forecasts are the least accurate. The last result potentially explains why prior research (for example, Baker and Wurgler 2006) finds an association between investor sentiment and cross-sectional stock returns.
| Author | : Copur, Zeynep |
| Publisher | : IGI Global |
| Total Pages | : 559 |
| Release | : 2015-01-31 |
| Genre | : Business & Economics |
| ISBN | : 1466674857 |
Download Handbook of Research on Behavioral Finance and Investment Strategies: Decision Making in the Financial Industry Book in PDF, ePub and Kindle
In an ever-changing economy, market specialists strive to find new ways to evaluate the risks and potential reward of economic ventures by assessing the importance of human reaction during the economic planning process. The Handbook of Research on Behavioral Finance and Investment Strategies: Decision Making in the Financial Industry presents an interdisciplinary, comparative, and competitive analysis of the thought processes and planning necessary for individual and corporate economic management. This publication is an essential reference source for professionals, practitioners, and managers working in the field of finance, as well as researchers and academicians interested in an interdisciplinary approach to combine financial management, sociology, and psychology.
| Author | : Geoffrey C. Friesen |
| Publisher | : |
| Total Pages | : 55 |
| Release | : 2003 |
| Genre | : |
| ISBN | : |
Download Quantifying Cognitive Biases in Analyst Earnings Forecasts Book in PDF, ePub and Kindle
This paper develops a formal model of analyst earnings forecasts that discriminates between rational behavior and that induced by cognitive biases. In the model, analysts are Bayesians who issue sequential forecasts that combine new information with the information contained in past forecasts. The model offers a number of testable implications that allow us to detect cognitive biases, and also to quantify their magnitude. We estimate the model and find strong evidence that analysts are overconfident about the precision of their own information and also subject to cognitive dissonance bias. We examine the influence of the relative amount of private information as a measure of ambiguity on the magnitude of the biases. The variation in overconfidence between the low- and high-ambiguity groups is consistent with the well-established variations documented in the psychological literature. We also demonstrate a relationship between book-to-market ratios and cognitive bias.
| Author | : Belén Díaz Díaz |
| Publisher | : Springer Nature |
| Total Pages | : 397 |
| Release | : 2020-05-11 |
| Genre | : Business & Economics |
| ISBN | : 3030369706 |
Download Responsible Business in a Changing World Book in PDF, ePub and Kindle
This book explores the current state of Corporate Social Responsibility (CSR) from an international perspective, the goal being to share ideas and visions for a sustainable future and to provide useful guidelines for academics, practitioners and policymakers in the context of the 2030 “Agenda for Sustainable Development” released by the United Nations. Research on CSR has evolved considerably over the last three decades. However, there are still many unanswered questions concerning the sustainability of business in an increasingly changing world, for example: If most companies consider CSR to be valuable to their organizations, why do only 15% of them systematically implement Social Responsibility initiatives? If CSR has been found to be profitable for companies, why are they so reluctant to develop an active, internal CSR policy? Why are there such significant differences in CSR adoption from country to country? Why does it take a huge crisis to make politicians react and regulate certain core CSR issues? This contributed volume answers these questions, presenting a wealth of case studies and new approaches in the process.
| Author | : Ling Cen |
| Publisher | : |
| Total Pages | : 53 |
| Release | : 2011 |
| Genre | : |
| ISBN | : |
Download The Role of Anchoring Bias in the Equity Market Book in PDF, ePub and Kindle
Ldquo;Anchoringrdquo; describes the fact that in forming numerical estimates of uncertain quantities, adjustments in assessments away from an arbitrary initial value are often insufficient. We show that this cognitive bias has significant economic consequences for the efficiency of financial markets. We find that analysts make optimistic (pessimistic) forecasts when a firm's forecast earnings per share (FEPS) is lower (higher) than the industry median. Further, firms with FEPS greater (lower) than the industry median experience abnormally high (low) future stock returns, particularly around subsequent earnings announcement dates. Finally, split firms experience greater positive forecast revisions, larger forecast errors, and larger negative earnings surprises after a stock split compared to which did not split their stocks, especially for firms with a low FEPS relative to the industry median.
| Author | : Claudia Qi |
| Publisher | : |
| Total Pages | : 45 |
| Release | : 2014 |
| Genre | : |
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Download Incentives Or Irrationality? International Evidence from the Impact of Individualism on Analyst Forecast Bias Book in PDF, ePub and Kindle
Based on a unique dataset that identifies the locations of 19,832 financial analysts covering 21,885 firms from 49 countries during 1996-2013, we find that individualism of analysts' country of residence is negatively associated with their earnings forecast optimism and positively associated with their forecast accuracy. Using multiple proxies for economic incentives and cognitive biases, we find that individualism affects analyst forecast optimism and accuracy through the economic incentives that analysts face, rather than their cognitive biases (irrationality). Our results highlight the importance for regulators and investors to factor in culture values when battling against biased analyst research.
| Author | : Helen Hurwitz |
| Publisher | : |
| Total Pages | : 35 |
| Release | : 2017 |
| Genre | : |
| ISBN | : |
Download Investor Sentiment and Management Earnings Forecast Bias Book in PDF, ePub and Kindle
This study investigates whether investor sentiment is associated with behavioral bias in managers' annual earnings forecasts that are generally issued early in the year when uncertainty is relatively high. I provide evidence that management earnings forecast optimism increases with investor sentiment. Furthermore, I find that managers' annual earnings forecasts are more pessimistic during low-sentiment periods than during normal-sentiment periods. Since managers lack incentives to further deflate stock prices during a low-sentiment period, this evidence indicates that sentiment-related management earnings forecast bias is likely to be unintentional. In addition, I find that the relation between management earnings forecast bias and investor sentiment is stronger for firms with higher uncertainty, consistent with investor sentiment having a greater influence on management earnings forecasts when uncertainty is higher.
| Author | : Yuk Ying (Candie) Chang |
| Publisher | : |
| Total Pages | : 75 |
| Release | : 2017 |
| Genre | : |
| ISBN | : |
Download The Best of Times, the Worst of Times Book in PDF, ePub and Kindle
Mood-induced optimism, cognitive inaccuracy, and distraction can affect analyst forecasts. This study compares and contrasts these influences. The novelty of our approach is that we first show that these behavioural biases have different implications for analysts' forecast errors conditioned on the errors being positive and negative. We then use proxies for positive and negative moods to empirically test the support for each of these biases. Consistent with cognitive precision, we find that analysts make less (more) accurate forecasts when they are in positive (negative) moods. We further show that these results are driven neither by sentiment associated with contemporaneous economic or market conditions nor by under- or over-reaction to more bad news released on days immediately before weekends or holidays.
| Author | : Seung-Woog Kwag |
| Publisher | : |
| Total Pages | : 110 |
| Release | : 2002 |
| Genre | : |
| ISBN | : |
Download Are Markets Rational? Book in PDF, ePub and Kindle
