Sell-side analyst reports and decision-maker reactions: Role of heuristics

André Machado and Fabiano Guasti Lima

Journal of Behavioral and Experimental Finance, 2021, vol. 32, issue C

Abstract: It is well known that heuristics affect people’s judgment within virtually every setting. We find that heuristics exert a strong and positive influence on the sell-side analyst writing process (broadly referred to as the “judgment process”) and that the interaction between detail (as defined) and overconfidence and between detail and tone strongly influence the sell-side analyst judgment process. We also find that decision-makers respond to these attributes. We assess how recommendations in sell-side analysts’ reports trigger decision-makers to trade by measuring trade volume. We apply canonical corrections to support our findings, as we believe that an individual’s judgment process is based on a set of outcome variables. Although the explanatory power of our results may seem low, they enhance our understanding of how sell-side analysts process soft and hard information.

Keywords: Sell-side analyst; Behavioral finance; Analyst reports; Trade volume (search for similar items in EconPapers)
JEL-codes: G23 G40 G41 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:32:y:2021:i:c:s2214635021001040

DOI: 10.1016/j.jbef.2021.100560

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