The Up Side of Being Down: Depressive Realism and Analyst Forecast Accuracy
64 Pages Posted: 27 Jul 2020 Last revised: 24 May 2021
Date Written: May 22, 2021
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: Suggested Citation