The Role of Anchoring Bias in the Equity Market: Evidence from Analysts’ Earnings Forecasts and Stock Returns

Ling Cen, Gilles Hilary and K. C. John Wei

Journal of Financial and Quantitative Analysis, 2013, vol. 48, issue 1, 47-76

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.

Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (75)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:48:y:2013:i:01:p:47-76_00

Access Statistics for this article

More articles in Journal of Financial and Quantitative Analysis from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().