Managerial Miscalibration: Presentation Slides

15 Pages Posted: 11 Nov 2019

See all articles by Itzhak Ben-David

Itzhak Ben-David

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER)

John R. Graham

Duke University; National Bureau of Economic Research (NBER)

Campbell R. Harvey

Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER)

Date Written: October 30, 2019

Abstract

We present a selection of seminar slides based on our 2013 Quarterly Journal of Economics paper, Managerial Miscalibration. Using a large panel of CFO forecasts of S&P 500 returns, we find that executives are severely miscalibrated, producing distributions that are far too narrow. Realized returns are within the executives' 80% confidence intervals only 36% of the time. We also find that executives who are miscalibrated about the stock market show similar miscalibration regarding their own firms’ prospects. Finally, firms with miscalibrated executives seem to follow more aggressive corporate policies: investing more and using more debt financing. We also feature an update where we nearly double our sample size. While it is often the case that results get weaker (or disappear) after publication, our new evidence suggests that the degree of miscalibration has worsened.


Keywords: Overprecision, Overconfidence, Behavioral Bias, Behavioral Economics, Investment, Leverage, Expected Returns, Survey Methodology, Capital Structure, Executive Compensation, Risk, Volatility Forecasts, Market Forecasts, Debt Policy, Behavioral Finance, Risk Premium

JEL Classification: G31, G32, G35, D03, D22, D84

Suggested Citation

Ben-David, Itzhak and Graham, John Robert and Harvey, Campbell R., Managerial Miscalibration: Presentation Slides (October 30, 2019). Available at SSRN: https://ssrn.com/abstract=3478314 or http://dx.doi.org/10.2139/ssrn.3478314

Itzhak Ben-David

Ohio State University (OSU) - Department of Finance ( email )

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HOME PAGE: http://fisher.osu.edu/fin/faculty/Ben-David/index.htm

National Bureau of Economic Research (NBER) ( email )

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HOME PAGE: http://fisher.osu.edu/fin/faculty/Ben-David/

John Robert Graham

Duke University ( email )

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United States
919-660-7857 (Phone)
919-660-8030 (Fax)

National Bureau of Economic Research (NBER)

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Campbell R. Harvey (Contact Author)

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7768 (Phone)

HOME PAGE: http://www.duke.edu/~charvey

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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