Managerial Miscalibration: Presentation Slides

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