This paper examines analysts’ catering behavior to current investor demand, proxied by the unbalanced stock market reaction toward optimistic forecasts and non-optimistic forecasts (i.e., optimism premium). Using data on earnings forecasts issued by sell-side analysts in China from 2014 to 2018, we show that the optimism premium significantly increases analysts’ tendency to issue optimistic forecasts—in short, that analysts do cater to investor demand. The implications of our findings for theory and practices are discussed.

Stock market reactions and optimism bias in analysts’ earnings forecasts. An analysis of China’s stock markets / Ji, Xu; Dong, Yan; Vagnani, Gianluca; Yang, Xiaoqi. - In: FINANCE RESEARCH LETTERS. - ISSN 1544-6123. - 59:(2023), pp. 1-8. [10.1016/j.frl.2023.104822]

Stock market reactions and optimism bias in analysts’ earnings forecasts. An analysis of China’s stock markets

Gianluca Vagnani;
2023

Abstract

This paper examines analysts’ catering behavior to current investor demand, proxied by the unbalanced stock market reaction toward optimistic forecasts and non-optimistic forecasts (i.e., optimism premium). Using data on earnings forecasts issued by sell-side analysts in China from 2014 to 2018, we show that the optimism premium significantly increases analysts’ tendency to issue optimistic forecasts—in short, that analysts do cater to investor demand. The implications of our findings for theory and practices are discussed.
2023
Financial analysts’ earnings forecast; optimism premium; catering behavior; conflict of interest
01 Pubblicazione su rivista::01a Articolo in rivista
Stock market reactions and optimism bias in analysts’ earnings forecasts. An analysis of China’s stock markets / Ji, Xu; Dong, Yan; Vagnani, Gianluca; Yang, Xiaoqi. - In: FINANCE RESEARCH LETTERS. - ISSN 1544-6123. - 59:(2023), pp. 1-8. [10.1016/j.frl.2023.104822]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11573/1697072
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