Presentation Slides for 'Decision Fatigue and Heuristic Analyst Forecasts'
26 Pages Posted: 18 May 2020
Date Written: April 26, 2020
Abstract
Psychological evidence indicates that decision quality declines after an extensive session of decision-making, a phenomenon known as decision fatigue. We study whether decision fatigue affects analysts’ judgments. Analysts cover multiple firms and often issue several forecasts in a single day. We find that forecast accuracy declines over the course of a day as the number of forecasts the analyst has already issued increases. Also consistent with decision fatigue, we find that the more forecasts an analyst issues, the higher the likelihood the analyst resorts to more heuristic decisions by herding more closely with the consensus forecast, self-herding (i.e., reissuing their own previous outstanding forecasts), and issuing a rounded forecast. Finally, we find that the stock market understands these effects and discounts for analyst decision fatigue.
Keywords: Analysts, Decision fatigue, Heuristic, Behavioral finance
JEL Classification: D03, G14, G20
Suggested Citation: Suggested Citation