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 Texas at Arlington

Sarah Khalaf

College of Business Administration Kuwait University

Du Nguyen

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

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 Texas at Arlington ( email )

701 S. West Street
Arlington, TX 76019
United States

Sarah Khalaf

College of Business Administration Kuwait University ( email )

University City
Shdadiya, Al Farwaniyah 12037
Kuwait

HOME PAGE: http://cbaweb.ku.edu.kw

Du Nguyen

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

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