Standing Out from the Crowd: The Real Effects of Outliers

56 Pages Posted: 12 May 2016 Last revised: 1 May 2019

See all articles by Qianqian Du

Qianqian Du

Hong Kong Polytechnic University

Frank Yu

China Europe International Business School

Xiaoyun Yu

Indiana University - Kelley School of Business - Department of Finance; China Academy of Financial Research (CAFR)

Date Written: April 29, 2019

Abstract

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

Du, Qianqian and Yu, Fang and Yu, Xiaoyun, Standing Out from the Crowd: The Real Effects of Outliers (April 29, 2019). Kelley School of Business Research Paper No. 16-40. Available at SSRN: https://ssrn.com/abstract=2778406 or http://dx.doi.org/10.2139/ssrn.2778406

Qianqian Du (Contact Author)

Hong Kong Polytechnic University ( email )

9/F, Li Ka Shing Tower
The Hong Kong Polytechnic University
Hong Kong, Hung Hom, Kowloon M923
China

Fang Yu

China Europe International Business School ( email )

669 Hongfeng Road
Pudong
Shanghai, 201206
China

Xiaoyun Yu

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States
812-855-3521 (Phone)
812-855-5875 (Fax)

China Academy of Financial Research (CAFR)

1954 Huashan Road
Shanghai P.R.China, 200030
China

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