The Up Side of Being Down: Depression and Crowdsourced Forecasts

77 Pages Posted: 27 Jul 2020 Last revised: 5 Aug 2022

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: August 5, 2022

Abstract

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

Jannati, Sima and Khalaf, Sarah and Nguyen, Du, The Up Side of Being Down: Depression and Crowdsourced Forecasts (August 5, 2022). 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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