The Up Side of Being Down: Depressive Realism and Analyst Forecast Accuracy

64 Pages Posted: 27 Jul 2020 Last revised: 24 May 2021

See all articles by Sima Jannati

Sima Jannati

University of Missouri-Columbia

Sarah Khalaf

Kuwait University

Du Nguyen

University of Missouri at Columbia - Robert J. Trulaske, Sr. College of Business

Date Written: May 22, 2021

Abstract

This paper tests whether mild depression improves judgment tasks, using earnings forecasts from Estimize. We find that a 1-standard-deviation increase in the segment of the U.S. population with depression leads to, on average, a 0.25% increase in future forecast accuracy, supporting the hypothesis. This impact is comparable to other determinants of Estimize users' accuracy and is robust to alternative measures and explanations. We find that reduced optimism is primarily how depression improves accuracy. We contribute to the literature by linking negative integral emotions to financial decision making.

Keywords: depressive realism; Estimize; earnings forecast accuracy; cognition

JEL Classification: G00, G24

Suggested Citation

Jannati, Sima and Khalaf, Sarah and Nguyen, Du, The Up Side of Being Down: Depressive Realism and Analyst Forecast Accuracy (May 22, 2021). Available at SSRN: https://ssrn.com/abstract=3640794 or http://dx.doi.org/10.2139/ssrn.3640794

Sima Jannati (Contact Author)

University of Missouri-Columbia ( email )

511 Cornell Hall
COLUMBIA, MO 65211
United States

Sarah Khalaf

Kuwait University ( email )

Safat, 13060
Kuwait

Du Nguyen

University of Missouri at Columbia - Robert J. Trulaske, Sr. College of Business ( email )

336 Cornell Hall
Columbia, MO 65211
United States

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