A Simultaneous Equations Analysis of Analysts' Forecast Bias and Institutional Ownership

EFMA 2001 Lugano Meetings; FR Bank of Atlanta Working Paper No. 2000-5

37 Pages Posted: 28 Jun 2000

See all articles by Lucy F. Ackert

Lucy F. Ackert

Kennesaw State University - Michael J. Coles College of Business

George Athanassakos

University of Western Ontario - Finance-Economics Area Group

Date Written: February 2001

Abstract

In this paper we use a simultaneous equations model to examine the relationship between analysts' forecasting decisions and institutions' investment decisions. Neglecting their interaction results in model misspecification. We find that analysts' optimism concerning a firm's earnings responds positively to changes in the number of institutions holding the firm's stock. At the same time, institutional demand responds positively to increases in analysts' optimism. We also investigate several firm characteristics as determinants of analysts' and institutions' decisions. We conclude that agency-driven behavioral considerations are significant.

JEL Classification: G10, G29, D23, D82

Suggested Citation

Ackert, Lucy F. and Athanassakos, George, A Simultaneous Equations Analysis of Analysts' Forecast Bias and Institutional Ownership (February 2001). EFMA 2001 Lugano Meetings; FR Bank of Atlanta Working Paper No. 2000-5, Available at SSRN: https://ssrn.com/abstract=224455 or http://dx.doi.org/10.2139/ssrn.224455

Lucy F. Ackert (Contact Author)

Kennesaw State University - Michael J. Coles College of Business ( email )

1000 Chastain Road
Department of Economics and Finance
Kennesaw, GA 30144
United States
770-423-6111 (Phone)
770-499-3209 (Fax)

George Athanassakos

University of Western Ontario - Finance-Economics Area Group ( email )

London, Ontario N6A 5B8
Canada

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