Journal article
Investor Sentiment and Analysts' Earnings Forecast Errors
Management science, Vol.58(2), pp.293-307
02/01/2012
DOI: 10.1287/mnsc.1110.1356
Abstract
We correlate analysts' forecast errors with temporal variation in investor sentiment. We find that when sentiment is high, analysts' forecasts of one-year-ahead earnings and long-term earnings growth are relatively more optimistic for "uncertain" or "difficult-to-value" firms. Adding these forecast errors to a regression of stock returns on sentiment absorbs a sizable fraction of the explanatory power of sentiment for the cross section of future returns. This finding provides direct support for the notion that investor sentiment affects the earnings expectations of hard-to-value firms. Additional tests suggest that this bias in expectations is unlikely to be strategic in nature. Our results provide new insight into the mechanism through which investor sentiment affects returns.
Details
- Title: Subtitle
- Investor Sentiment and Analysts' Earnings Forecast Errors
- Creators
- Paul Hribar - University of IowaJohn McInnis - The University of Texas at Austin
- Resource Type
- Journal article
- Publication Details
- Management science, Vol.58(2), pp.293-307
- Publisher
- Informs
- DOI
- 10.1287/mnsc.1110.1356
- ISSN
- 0025-1909
- eISSN
- 1526-5501
- Number of pages
- 15
- Language
- English
- Date published
- 02/01/2012
- Academic Unit
- Accounting
- Record Identifier
- 9984380430702771
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