The Up Side of Being Down: Depression and Crowdsourced Forecasts
77 Pages Posted: 27 Jul 2020 Last revised: 5 Aug 2022
Date Written: August 5, 2022
Using earnings forecasts from Estimize, we test whether crowdsourced financial judgments are affected by persistent mild depression. We find that a 1-standard-deviation increase in the segment of the U.S. population with depression leads to a 0.25% increase in users' forecast accuracy. This effect is robust to alternative measures and is distinct from the influence of temporary seasonal depression or other sentiment measures on decision-making. Reduced optimism and slow processing of information are two mechanisms that explain our findings. Overall, we contribute to the literature by linking depression to crowdsourced financial evaluations.
Keywords: depression; crowdsourced earnings forecasts; forecast accuracy; cognition; Estimize
JEL Classification: G00, G24
Suggested Citation: Suggested Citation