Investor feedback: impact on analyst biases and investor critical evaluation

Barradale, Nigel J.; Plenborg, Thomas; Stæhr, Simone

doi:10.1111/acfi.12806

Cited by 5 publications

(2 citation statements)

References 99 publications

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“…Previous studies find that analysts are important reference bases for investors (see Chang et al, 2014;Jiang et al, 2014;Barradale et al, 2021). Individual investors are considered uninformed but dominate trading in the Chinese stock market.…”

Section: Influence Of Confirmatory Bias On Pricing Efficiencymentioning

confidence: 99%

Is information really efficient for the market? Evidence of confirmatory bias in China

Chen

Xiong

Gao

2021

Accounting & Finance

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We use the earnings forecast revisions during the period 2005-2019 to study the performance of confirmatory bias in China. As we have found, analysts are less likely to make earnings forecast revisions when the latest two signals are opposite or different from their previous beliefs. In addition, we find confirmatory bias has a significantly positive influence on analysts' forecast dispersions, especially when new signals are negative. Finally, we extend the practical significance by combining confirmatory bias with pricing efficiency and find significant harms, especially in bull markets. Uninformed investors and market supervisors should take precautions to avoid this bias.

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Section: Influence Of Confirmatory Bias On Pricing Efficiencymentioning

confidence: 99%

Is information really efficient for the market? Evidence of confirmatory bias in China

Chen

Xiong

Gao

2021

Accounting & Finance

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“…Based on a sample of sell-side analysts at a mid-size investment bank,Maber et al (2021) document that the average sell-side analyst holds approximately 750 private calls and 45 one-on-one meetings with client investors in the course of a typical semiannual period.6 In an experimental study,Barradale et al (2022) find that feedback from investors enhances the quality of forecasts by students posing as sell-side analysts.…”

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Do buy‐side analysts inform sell‐side analyst research?

Cici,

Shane,

Yang

2023

Accounting & Finance

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This paper examines whether sell‐side analysts' interactions with buy‐side analysts influence the quality of sell‐side research output. We hypothesise that these interactions offer the sell side a view of the buy side's private information, which enhances the quality of sell‐side research. Our findings show that analyst earnings forecast accuracy improves with these interactions with diminishing returns. Results are robust to alternative proxies for research quality and information flow from buy‐side to sell‐side analysts. Additional tests rule out endogeneity concerns, strengthening the inference that feedback from interactions with buy‐side analysts improves the quality of sell‐side research output.

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Examining the impact of market uncertainty on earnings forecasts: an empirical study from Egypt

Pasha,

Wahba,

Lasheen

2024

JRF

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PurposeThis paper aims to conduct a comparative analysis of the impact of market uncertainty on the degree of accuracy and bias of analysts' earnings forecasts versus four model-based earnings forecasts.Design/methodology/approachThe study employs panel regression analysis on a sample of Egyptian listed companies from 2005 to 2022 to examine the impact of market uncertainty on the accuracy and bias of each type of earnings forecast.FindingsThe empirical analysis reveals that market uncertainty significantly affects analysts’ earnings forecast accuracy and bias, while model-based earnings forecasts are less affected. Furthermore, the Earnings Persistence and Residual Income model-based earnings were found to be superior in terms of exhibiting the least susceptibility to the impact of market uncertainty on their forecast accuracy and biasness levels, respectively.Practical implicationsThe findings have important implications for stakeholders within the financial realm, including investors, financial analysts, corporate executives and portfolio managers. They emphasize the importance of considering market uncertainty when formulating earnings forecasts, while concurrently highlighting the potential benefits of using alternative forecasting methods.Originality/valueTo our knowledge, the influence of market uncertainty on analysts' earnings forecast accuracy and bias in the MENA region, particularly in the Egyptian market, remains unexplored in existing research. Additionally, this paper contributes to the existing literature by pinpointing the forecasting method, specifically distinguishing between analysts-based and model-based approaches, whose predictive quality is less adversely impacted by market uncertainty in an emerging market.

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Investor feedback: impact on analyst biases and investor critical evaluation

Cited by 5 publications

References 99 publications

Is information really efficient for the market? Evidence of confirmatory bias in China

Is information really efficient for the market? Evidence of confirmatory bias in China

Do buy‐side analysts inform sell‐side analyst research?

Examining the impact of market uncertainty on earnings forecasts: an empirical study from Egypt

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