Is cognitive bias really present in analyst forecasts? The role of investor sentiment
Fecha
2014Versión
Acceso abierto / Sarbide irekia
Tipo
Artículo / Artikulua
Versión
Versión aceptada / Onetsi den bertsioa
Impacto
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10.1016/j.ibusrev.2014.01.001
Resumen
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 ...
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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. [--]
Materias
Analyst forecasts,
Optimism,
Strategic Behaviour,
Investor sentiment,
Cognitive Bias
Editor
Elsevier
Publicado en
International Business Review 23 (2014) 824–837
Departamento
Universidad Pública de Navarra. Departamento de Gestión de Empresas /
Nafarroako Unibertsitate Publikoa. Enpresen Kudeaketa Saila
Versión del editor
Entidades Financiadoras
This paper has received financial support from the Spanish Ministry of Science and Innovation (ECO2009-12819) and from the Spanish Ministry of Economy and Competitiveness (ECO2012-35946-C02-01). Elena Ferrer would also like to thank the Scientific Research Grant from Fundación Banco Herrero 2012.