Abstract

http://ssrn.com/abstract=1452893
 
 

References (39)



 
 

Citations (6)



 


 



Investor Sentiment and Analysts' Earnings Forecast Errors


Paul Hribar


University of Iowa - Henry B. Tippie College of Business

John M. McInnis


University of Texas at Austin - Department of Accounting

February 15, 2012

Management Science (Special Issue on Behaviorial Economics and Finance), Vol. 58 (2) pp. 293-307, February 2012

Abstract:     
We correlate analysts’ forecast errors with temporal variation in investor sentiment. We find that when sentiment is high, analysts’ forecasts of one-year-ahead earnings and long-term earnings growth are relatively more optimistic for “uncertain” or “difficult to value” firms. Adding these forecast errors to a regression of stock returns on sentiment absorbs a sizable fraction of the explanatory power of sentiment for the cross-section of future returns. This finding provides direct support the notion that investor sentiment affects the earnings expectations of hard to value firms. Additional tests suggest that this bias in expectations is unlikely to be strategic in nature. Our results provide new insight into the mechanism through which investor sentiment affects returns.

Number of Pages in PDF File: 32

Keywords: Analyst Forecasts, Sentiment, Stock Returns, Optimism, Expectational Errors

JEL Classification: G12, G14, G29, M41

Accepted Paper Series


Download This Paper

Date posted: August 15, 2009 ; Last revised: June 1, 2012

Suggested Citation

Hribar, Paul and McInnis, John M., Investor Sentiment and Analysts' Earnings Forecast Errors (February 15, 2012). Management Science (Special Issue on Behaviorial Economics and Finance), Vol. 58 (2) pp. 293-307, February 2012. Available at SSRN: http://ssrn.com/abstract=1452893

Contact Information

Paul Hribar
University of Iowa - Henry B. Tippie College of Business ( email )
Dept. of Accounting
Iowa City, IA 52242-1000
United States
319-335-1008 (Phone)
John M. McInnis (Contact Author)
University of Texas at Austin - Department of Accounting ( email )
Austin, TX 78712
United States
512-232-6791 (Phone)
Feedback to SSRN


Paper statistics
Abstract Views: 2,537
Downloads: 760
Download Rank: 16,174
References:  39
Citations:  6

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo6 in 0.375 seconds