When Do Signals Counteract The Effects of Confirmation Bias? Evidence From Sell-Side Analysts’ Forecasts

I empirically study whether strong signals counteract the effects of confirmation bias in sell-side analysts’ stock price forecasts when these signals are contradictory. I use target prices to measure forecast bias and the growth in Earnings Per Share as signals, and regress analysts’ forecast bias over different deciles of high signals interacted with prior negative forecast bias in a dynamic panel data model. I find that analysts underreact to favorable signals when the prior is pessimistic, except for sufficiently strong signals which cause analysts to issue more optimistic target prices. Also, that analysts underreact to low signals, except for sufficiently low signals.

Grantor dc:publisher

Universidad del Rosario

Year dc:date

2018

Author dc:creator

• Astaiza, José Gabriel

• Earnings growth
• Pessimistic prior
• Overreaction to signals
• Contradictory signals
• Producción
• Precios
• Ganancias
• Pronóstico de la economía

Statement dc:rights

• info:eu-repo/semantics/openAccess

Language dc:language

spa

Identifier

http://repository.urosario.edu.co/handle/10336/18661

OAI identifier oai:identifier

oai:repository.urosario.edu.co:10336/18661