Managerial Miscalibration

Itzhak Ben-David, John R. Graham and Campbell Harvey ()

No 16215, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using a unique 10-year panel that includes more than 13,300 expected stock market return probability distributions, we find that executives are severely miscalibrated, producing distributions that are too narrow: realized market returns are within the executives' 80% confidence intervals only 36% of the time. We show that executives reduce the lower bound of the forecast confidence interval during times of high market uncertainty; however, ex post miscalibration is worst during periods of high uncertainty. We also find that executives who are miscalibrated about the stock market show similar miscalibration regarding their own firms' prospects. Finally, firms with miscalibrated executives seem to follow more aggressive corporate policies: investing more and using more debt financing.

JEL-codes: G30 G31 G32 G35 (search for similar items in EconPapers)
Date: 2010-07
Note: CF
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

Published as tzhak Ben-David, John R. Graham, Campbell R. Harvey , 2013. "Managerial Miscalibration," The Quarterly Journal of Economics, Oxford University Press, vol. 128(4), pages 1547-1584.

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Journal Article: Managerial Miscalibration (2013)
Working Paper: Managerial Miscalibration (2010)
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