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Overconfidence Bias, Over/Under-reaction of Financial Analysts on the Tunisian Stock Market, and Their Impacts on the Earnings Forecasts

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  • Ahmed Bouteska

    (Faculty of Economics and Management of Tunis, URISO, University of Tunis El Manar, Tunisia,)

  • Boutheina Regaieg

    (Faculty of Law, Economics and Management of Jendouba, University of Jendouba, Tunisia.)

Abstract

This paper aims to investigate the effect of financial analysts' recommendations on the overconfidence and over or under-reaction to previous years' earnings, as well as their impact on investment decisions in the Tunisian stock market. Literature mostly turned out that a positive bias in analysts' forecasts overreacted to prior earnings changes. Our study is based on the assumption that overconfidence among analysts can be understood through the accuracy of their forecasts, but also it is detected by the way that analyst provides a clear recommendation or not. The analysis employs a panel regression models using annual and bi-annual data over the period 2010-2015. Empirical results show that analysts on the Tunisian stock market are too confident in their forecasts on average, and there is clearly an overall over-reaction to past earnings changes. However, self-confidence is greater for those forecasts that are equipped with a recommendation, when the over-reaction is greater for the not equipped forecasts.

Suggested Citation

  • Ahmed Bouteska & Boutheina Regaieg, 2017. "Overconfidence Bias, Over/Under-reaction of Financial Analysts on the Tunisian Stock Market, and Their Impacts on the Earnings Forecasts," International Journal of Economics and Financial Issues, Econjournals, vol. 7(2), pages 208-214.
    • Handle: RePEc:eco:journ1:2017-02-28
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    References listed on IDEAS

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    More about this item

    Keywords

    Overconfidence; Overreaction; Analysts' Recommendations; Earnings Forecasts;
    All these keywords.

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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