Analyst Bias, Firm Characteristics, and Stock Returns in the Australian Stock Market

39 Pages Posted: 2 Apr 2010

See all articles by Shibely Sadique

Shibely Sadique

Monash University

Francis Haeuck In

Monash University - Department of Accounting; Financial Research Network (FIRN)

Madhu Veeraraghavan

T.A. PAI Management Institute, Finance Area

Date Written: March 31, 2010

Abstract

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

Sadique, Shibely and In, Francis Haeuck and Veeraraghavan, Madhu, Analyst Bias, Firm Characteristics, and Stock Returns in the Australian Stock Market (March 31, 2010). Available at SSRN: https://ssrn.com/abstract=1582731 or http://dx.doi.org/10.2139/ssrn.1582731

Shibely Sadique

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

Francis Haeuck In

Monash University - Department of Accounting ( email )

Building 11E
Clayton, Victoria 3800
Australia
+61 3 9905 1561 (Phone)
+61 3 9905 5475 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Madhu Veeraraghavan (Contact Author)

T.A. PAI Management Institute, Finance Area ( email )

Bangalore
Manipal, Karnataka 576104
India
+91-820-2701030 (Phone)

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