The Influence of Analyst and Management Forecasts on Investor Decision Making: An Experimental Approach

33 Pages Posted: 14 May 2007

See all articles by Millicent Chang

Millicent Chang

The University of Western Australia; University of Wollongong

Juliana Ng

Australian National University - School of Accounting & Business Information Systems

Date Written: March 24, 2007

Abstract

Analyst and management forecasts signal a firm's future prospects and research suggests that investors are conscious of the differing incentives to release news. We examine investor reaction to the information contained in these forecasts by considering whether decisions about their shareholdings are influenced by expectations about the motives of analysts and management. Using an experiment that manipulated the type of news released and investors' stock position, we found that unfavorable forecasts had a greater effect than favorable forecasts. Investors also place more emphasis on the news released by analysts, suggesting that information from an independent source appears to be more persuasive.

Keywords: Analyst forecasts, management forecasts, investor decision making

JEL Classification: M41

Suggested Citation

Chang, Millicent and Ng, Juliana, The Influence of Analyst and Management Forecasts on Investor Decision Making: An Experimental Approach (March 24, 2007). Available at SSRN: https://ssrn.com/abstract=976130 or http://dx.doi.org/10.2139/ssrn.976130

Millicent Chang (Contact Author)

The University of Western Australia ( email )

35 Stirling Highway
Crawley, Western Australia 6009
AUSTRALIA

University of Wollongong ( email )

Northfields Avenue
Wollongong, New South Wales 2522
Australia

Juliana Ng

Australian National University - School of Accounting & Business Information Systems ( email )

Canberra, 2600
Australia
+61 2 6125 7331 (Phone)

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