Analysts' Weighting of Private and Public Information
AbstractUsing both a linear regression method and a probability-based method, we find that on average, analysts place larger than efficient weights on (i.e., they overweight) their private information when they forecast corporate earnings. We also find that analysts overweight more when issuing forecasts more favorable than the consensus, and overweight less, and may even underweight, private information when issuing forecasts less favorable than the consensus. Further, the deviation from efficient weighting increases when the benefits from doing so are high or when the costs of doing so are low. These results suggest that analysts' incentives play a larger role in misweighting than their behavioral biases. Copyright 2006, Oxford University Press.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Society for Financial Studies in its journal The Review of Financial Studies.
Volume (Year): 19 (2006)
Issue (Month): 1 ()
Contact details of provider:
Postal: Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.
Web page: http://www.rfs.oupjournals.org/
More information through EDIRC
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Marcel Naujoks & Kevin Aretz & Alexander Kerl & Andreas Walter, 2009. "Do German security analysts herd?," Financial Markets and Portfolio Management, Springer, vol. 23(1), pages 3-29, March.
- Dan Bernhardt & Murillo Campbello & Edward Kutsoati, 2002.
Discussion Papers Series, Department of Economics, Tufts University
0213, Department of Economics, Tufts University.
- Martinez, Jose Vicente, 2007. "Information Misweighting and Stock Recommendations," SIFR Research Report Series 59, Institute for Financial Research.
- Peter Thompson, 2008.
"Desperate Housewives? Communication Difficulties and the Dynamics of Marital (un)Happiness,"
Royal Economic Society, vol. 118(532), pages 1640-1669, October.
- Peter Thompson, 2005. "Desperate Housewives? Communication Difficulties and the Dynamics of Marital (un)Happiness," Working Papers 0515, Florida International University, Department of Economics, revised Jan 2006.
- Lahiri, Kajal & Sheng, Xuguang, 2008. "Evolution of forecast disagreement in a Bayesian learning model," Journal of Econometrics, Elsevier, vol. 144(2), pages 325-340, June.
- Martinez, Jose Vicente, 2011. "Information misweighting and the cross-section of stock recommendations," Journal of Financial Markets, Elsevier, vol. 14(4), pages 515-539, November.
- Peter Thompson & Steven Klepper, 2009.
"Disagreements and Intra-Industry Spinoffs,"
0907, Florida International University, Department of Economics.
- Bosquet, Katrien & de Goeij, Peter & Smedts, Kristien, 2009. "Coexistence and dynamics of overconfidence and strategic incentives," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/252262, Katholieke Universiteit Leuven.
- 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.
- 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.
- Peter Thompson & Jing Chen, 2011.
"Disagreements, employee spinoffs and the choice of technology,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 14(3), pages 455-474, July.
- Jing Chen & Peter Thompson, 2010. "Code files for "Disagreements, Employee Spinoffs and the Choice of Technology"," Computer Codes 09-182, Review of Economic Dynamics.
- Chen, Shaw K. & Lin, Bing-Xuan & Wang, Yaping & Wu, Liansheng, 2010. "The frequency and magnitude of earnings management: Time-series and multi-threshold comparisons," International Review of Economics & Finance, Elsevier, vol. 19(4), pages 671-685, October.
- Kryzanowski, Lawrence & Rahman, Abdul H., 2009. "Degrees-of-freedom problem and implied cost of equity capital," Finance Research Letters, Elsevier, vol. 6(3), pages 171-178, September.
- 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.
- Friesen, Geoffrey & Weller, Paul A., 2006. "Quantifying cognitive biases in analyst earnings forecasts," Journal of Financial Markets, Elsevier, vol. 9(4), pages 333-365, November.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.