Analyst Bias, Firm Characteristics, and Stock Returns in the Australian Stock Market
39 Pages Posted: 2 Apr 2010
Date Written: March 31, 2010
This study shows that (1) Australian analysts are optimistic in their forecasts and underreact to new information, (2) the continuous disclosure (CD) regime has a negative impact on forecast optimism and dispersion, (3) analyst forecast bias is associated with certain firm characteristics, (4) optimistic forecast bias is high for financially distressed firms, (5) forecast dispersion is not a proper measure of uncertainty, and (6) investors are unable to distinguish the predictable component of bias from the unpredictable component, though they are aware of the overall optimism in analysts’ forecasts and adjust for it.
Keywords: Optimistic bias, firm characteristics, investor reaction
JEL Classification: G14, G20
Suggested Citation: Suggested Citation