The Role of Anchoring Bias in the Equity Market: Evidence from Analysts’ Earnings Forecasts and Stock Returns
By Ling Cen, Gilles Hilary, K. J. Wei. Journal of Financial and Quantitative Analysis, 2012
185 citations recorded by the source corpus.
Abstract We test the implications of anchoring bias associated with forecast earnings per share (FEPS) for forecast errors, earnings surprises, stock returns, and stock splits. We find that analysts make optimistic (pessimistic) forecasts when a firm’s FEPS is lower (higher) than the industry median. Further, firms with FEPS greater (lower) than the industry median experience abnormally high (low) future stock returns, particularly around subsequent earnings announcement dates. These firms are also more likely to engage in stock splits. Finally, split firms experience more positive forecast revisions, more negative forecast errors, and more negative earnings surprises after stock splits.
Subfields: Accounting, Finance
View Paper: https://www.semanticscholar.org/paper/47514b1319837fd0d29af4878a72a1e2c00a3fcd
How researchers see this paper
The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.
- Tijana Zrnic
- Moritz Hardt
- Jonathan Ullman
- Cynthia Dwork
- Mark Bun
- Vitaly Feldman
- Raef Bassily
- Aaron Roth
Citations in the corpus
- Natural Analysts in Adaptive Data Analysis (2019, background): “A common cognitive bias that humans experience in analytical tasks is called the anchoring bias (Campbell & Sharpe, 2009; Cen et al., 2013).”