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Quantifying cognitive biases in analyst earnings forecasts

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  • Friesen, Geoffrey
  • Weller, Paul A.
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Markets.

    Volume (Year): 9 (2006)
    Issue (Month): 4 (November)
    Pages: 333-365

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    Handle: RePEc:eee:finmar:v:9:y:2006:i:4:p:333-365

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    Web page: http://www.elsevier.com/locate/finmar

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    References

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    2. Newey, Whitney K & West, Kenneth D, 1987. "Hypothesis Testing with Efficient Method of Moments Estimation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(3), pages 777-87, October.
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    5. Brown, Lawrence D & Rozeff, Michael S, 1978. "The Superiority of Analyst Forecasts as Measures of Expectations: Evidence from Earnings," Journal of Finance, American Finance Association, vol. 33(1), pages 1-16, March.
    6. Scharfstein, David S & Stein, Jeremy C, 1990. "Herd Behavior and Investment," American Economic Review, American Economic Association, vol. 80(3), pages 465-79, June.
    7. Nicholas Barberis & Andrei Shleifer & Robert W. Vishny, 1997. "A Model of Investor Sentiment," NBER Working Papers 5926, National Bureau of Economic Research, Inc.
    8. Kent Daniel & David Hirshleifer & Avanidhar Subrahmanyam, 1998. "Investor Psychology and Security Market Under- and Overreactions," Journal of Finance, American Finance Association, vol. 53(6), pages 1839-1885, December.
    9. Yates, J. Frank & Lee, Ju-Whei & Shinotsuka, Hiromi, 1996. "Beliefs about Overconfidence, Including Its Cross-National Variation," Organizational Behavior and Human Decision Processes, Elsevier, vol. 65(2), pages 138-147, February.
    10. Terrance Odean, 1998. "Volume, Volatility, Price and Profit When All Traders Are Above Average," Finance 9803001, EconWPA.
    11. Ottaviani, Marco & Sorensen, Peter Norman, 2006. "The strategy of professional forecasting," Journal of Financial Economics, Elsevier, vol. 81(2), pages 441-466, August.
    12. John C. Easterwood & Stacey R. Nutt, 1999. "Inefficiency in Analysts' Earnings Forecasts: Systematic Misreaction or Systematic Optimism?," Journal of Finance, American Finance Association, vol. 54(5), pages 1777-1797, October.
    13. Michaely, Roni & Womack, Kent L, 1999. "Conflict of Interest and the Credibility of Underwriter Analyst Recommendations," Review of Financial Studies, Society for Financial Studies, vol. 12(4), pages 653-86.
    14. Yates, J. Frank & Zhu, Ying & Ronis, David L. & Wang, Deng-Feng & Shinotsuka, Hiromi & Toda, Masanao, 1989. "Probability judgment accuracy: China, Japan, and the United States," Organizational Behavior and Human Decision Processes, Elsevier, vol. 43(2), pages 145-171, April.
    15. Klein, April, 1990. "A direct test of the cognitive bias theory of share price reversals," Journal of Accounting and Economics, Elsevier, vol. 13(2), pages 155-166, July.
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    17. Michael P. Keane & David E. Runkle, 1998. "Are Financial Analysts' Forecasts of Corporate Profits Rational?," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 768-805, August.
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    19. Cooper, Rick A. & Day, Theodore E. & Lewis, Craig M., 2001. "Following the leader: *1: a study of individual analysts' earnings forecasts," Journal of Financial Economics, Elsevier, vol. 61(3), pages 383-416, September.
    20. Goetzmann, William N & Peles, Nadav, 1997. "Cognitive Dissonance and Mutual Fund Investors," Journal of Financial Research, Southern Finance Association & Southwestern Finance Association, vol. 20(2), pages 145-58, Summer.
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    23. Trueman, Brett, 1994. "Analyst Forecasts and Herding Behavior," Review of Financial Studies, Society for Financial Studies, vol. 7(1), pages 97-124.
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    26. Brown, Lawrence D. & Hagerman, Robert L. & Griffin, Paul A. & Zmijewski, Mark E., 1987. "Security analyst superiority relative to univariate time-series models in forecasting quarterly earnings," Journal of Accounting and Economics, Elsevier, vol. 9(1), pages 61-87, April.
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    28. Ron Kasznik, 2002. "Does Meeting Earnings Expectations Matter? Evidence from Analyst Forecast Revisions and Share Prices," Journal of Accounting Research, Wiley Blackwell, vol. 40(3), pages 727-759, 06.
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    30. Fried, Dov & Givoly, Dan, 1982. "Financial analysts' forecasts of earnings : A better surrogate for market expectations," Journal of Accounting and Economics, Elsevier, vol. 4(2), pages 85-107, October.
    31. Terrance Odean, 1998. "Volume, Volatility, Price, and Profit When All Traders Are Above Average," Journal of Finance, American Finance Association, vol. 53(6), pages 1887-1934, December.
    32. Ehrbeck, Tilman & Waldmann, Robert, 1996. "Why Are Professional Forecasters Biased? Agency versus Behavioral Explanations," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 21-40, February.
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    35. Qi Chen & Wei Jiang, 2006. "Analysts' Weighting of Private and Public Information," Review of Financial Studies, Society for Financial Studies, vol. 19(1), pages 319-355.
    36. Prendergast, Canice & Stole, Lars, 1996. "Impetuous Youngsters and Jaded Old-Timers: Acquiring a Reputation for Learning," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1105-34, December.
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    Cited by:
    1. Han, Bing & Hirshleifer, David & Wang, Tracy Yue, 2005. "Investor Overconfidence and the Forward Discount Puzzle," Working Paper Series 2005-21, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    2. Gloede, Oliver & Menkhoff, Lukas, 2011. "Financial professionals' overconfidence:Is it experience, function, or attitude?," Hannover Economic Papers (HEP) dp-428, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    3. Ramnath, Sundaresh & Rock, Steve & Shane, Philip, 2008. "The financial analyst forecasting literature: A taxonomy with suggestions for further research," International Journal of Forecasting, Elsevier, vol. 24(1), pages 34-75.
    4. Skala, Dorota, 2008. "Overconfidence in Psychology and Finance – an Interdisciplinary Literature Review," MPRA Paper 26386, University Library of Munich, Germany.
    5. Friesen, Geoffrey C. & Weller, Paul A. & Dunham, Lee M., 2009. "Price trends and patterns in technical analysis: A theoretical and empirical examination," Journal of Banking & Finance, Elsevier, vol. 33(6), pages 1089-1100, June.
    6. Beshears, John & Milkman, Katherine L., 2011. "Do sell-side stock analysts exhibit escalation of commitment?," Journal of Economic Behavior & Organization, Elsevier, vol. 77(3), pages 304-317, March.
    7. Van Campenhout, Geert & Verhestraeten, Jan-Francies, 2010. "Herding Behavior among Financial Analysts: a literature review," Working Papers 2010/39, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.

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