Standing Out from the Crowd: The Real Effects of Outliers
56 Pages Posted: 12 May 2016 Last revised: 1 May 2019
Date Written: April 29, 2019
This paper examines the real effects of outlier opinions in the context of extreme analyst optimism. Instead of being ignored by economic agents, the extremism in an outlier forecast is positively related to the extent of firm earnings management. When exploring potential channels, we find that the arrival of an outlier forecast increases the optimism of peer analysts and generates strong reactions from investors. Using a set of novel measures for analysts’ career advancement, we find that personal motives are likely the cause of analysts voicing extreme views.
Keywords: outliers; extreme optimism; financial analyst; corporate governance
JEL Classification: G34, M41, G24
Suggested Citation: Suggested Citation