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Do analysts overreact to extreme good news in earnings?

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  • Zhaoyang Gu
  • Jian Xue

Abstract

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Suggested Citation

  • Zhaoyang Gu & Jian Xue, 2007. "Do analysts overreact to extreme good news in earnings?," Review of Quantitative Finance and Accounting, Springer, vol. 29(4), pages 415-431, November.
    • Handle: RePEc:kap:rqfnac:v:29:y:2007:i:4:p:415-431
    DOI: 10.1007/s11156-007-0037-8
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    References listed on IDEAS

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    1. Han, Bong H & Manry, David & Shaw, Wayne, 2001. "Improving the Precision of Analysts' Earnings Forecasts by Adjusting for Predictable Bias," Review of Quantitative Finance and Accounting, Springer, vol. 17(1), pages 81-98, July.
    2. Harrison Hong & Jeremy C. Stein, 1999. "A Unified Theory of Underreaction, Momentum Trading, and Overreaction in Asset Markets," Journal of Finance, American Finance Association, vol. 54(6), pages 2143-2184, December.
    3. Karl B. Diether & Christopher J. Malloy & Anna Scherbina, 2002. "Differences of Opinion and the Cross Section of Stock Returns," Journal of Finance, American Finance Association, vol. 57(5), pages 2113-2141, October.
    4. Machuga, Susan M & Pfeiffer, Ray J, Jr & Verma, Kiran, 2002. "Economic Value Added, Future Accounting Earnings, and Financial Analysts' Earnings Per Share Forecasts," Review of Quantitative Finance and Accounting, Springer, vol. 18(1), pages 59-73, January.
    5. Barberis, Nicholas & Shleifer, Andrei & Vishny, Robert, 1998. "A model of investor sentiment," Journal of Financial Economics, Elsevier, vol. 49(3), pages 307-343, September.
    6. Mest, David P & Plummer, Elizabeth, 2003. "Analysts' Rationality and Forecast Bias: Evidence from Sales Forecasts," Review of Quantitative Finance and Accounting, Springer, vol. 21(2), pages 103-122, September.
    7. De Bondt, Werner F M & Thaler, Richard H, 1990. "Do Security Analysts Overreact?," American Economic Review, American Economic Association, vol. 80(2), pages 52-57, May.
    8. Gu, Zhaoyang & Wu, Joanna Shuang, 2003. "Earnings skewness and analyst forecast bias," Journal of Accounting and Economics, Elsevier, vol. 35(1), pages 5-29, April.
    9. David Hirshleifer, 2001. "Investor Psychology and Asset Pricing," Journal of Finance, American Finance Association, vol. 56(4), pages 1533-1597, August.
    10. 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.
    11. McNichols, M & O'Brien, PC, 1997. "Self-selection and analyst coverage," Journal of Accounting Research, Wiley Blackwell, vol. 35, pages 167-199.
    12. Dennis Fan & Raymond So & Jason Yeh, 2006. "Analyst Earnings Forecasts for Publicly Traded Insurance Companies," Review of Quantitative Finance and Accounting, Springer, vol. 26(2), pages 105-136, March.
    13. Rachel M. Hayes & Carolyn B. Levine, 2000. "An Approach to Adjusting Analysts' Consensus Forecasts for Selection Bias," Contemporary Accounting Research, John Wiley & Sons, vol. 17(1), pages 61-83, March.
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    Citations

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    Cited by:

    1. Leppin, Julian Sebastian, 2014. "The relation between overreaction in forecasts and uncertainty: A nonlinear approachvon," HWWI Research Papers 158, Hamburg Institute of International Economics (HWWI).
    2. Ryan D. Leece & Todd P. White, 2017. "The effects of firms’ information environment on analysts’ herding behavior," Review of Quantitative Finance and Accounting, Springer, vol. 48(2), pages 503-525, February.
    3. Low, Rand Kwong Yew & Tan, Enoch, 2016. "The role of analyst forecasts in the momentum effect," International Review of Financial Analysis, Elsevier, vol. 48(C), pages 67-84.
    4. Bruno Deschamps, 2015. "Are aggregate corporate earnings forecasts unbiased and efficient?," Review of Quantitative Finance and Accounting, Springer, vol. 45(4), pages 803-818, November.
    5. Greg Filbeck & Xin Zhao & Ryan Knoll, 2017. "An analysis of working capital efficiency and shareholder return," Review of Quantitative Finance and Accounting, Springer, vol. 48(1), pages 265-288, January.
    6. Raj Aggarwal & Brian M. Lucey & Fergal A. O'Connor, 2014. "Rationality in Precious Metals Forward Markets: Evidence of Behavioural Deviations in the Gold Markets," The Institute for International Integration Studies Discussion Paper Series iiisdp462, IIIS.
    7. K. C. Kenneth Chu & W. H. Sophia Zhai, 2021. "Distress risk puzzle and analyst forecast optimism," Review of Quantitative Finance and Accounting, Springer, vol. 57(2), pages 429-460, August.
    8. April Knill & Kristina Minnick & Ali Nejadmalayeri, 2012. "Experience, information asymmetry, and rational forecast bias," Review of Quantitative Finance and Accounting, Springer, vol. 39(2), pages 241-272, August.
    9. Taoufik Elkemali, 2023. "Uncertainty and Financial Analysts’ Optimism: A Comparison between High-Tech and Low-Tech European Firms," Sustainability, MDPI, vol. 15(3), pages 1-22, January.
    10. Leppin, Julian Sebstian, 2014. "The Relation Between Overreaction in Forecasts and Uncertainty: A Nonlinear Approach," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100284, Verein für Socialpolitik / German Economic Association.

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    More about this item

    Keywords

    Financial analysts; Earnings forecast; Underreaction; Overreaction; Forecast bias; G29; M41;
    All these keywords.

    JEL classification:

    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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