Inefficiency in Analyst's Earnings Forecasts: Systematic Misreaction or Systematic Optimism?

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Authored By
Easterwood, John C., Nutt, Stacey R.
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Interests
Neurology
Surgery
Speciality
Surgery
Neurology
Book Detail
volume
54
ISSN
00221082
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9781907816741
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true
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["Easterwood, John C., Nutt, Stacey R.","BUSINESS forecasting, INVESTMENT analysis, INVESTMENT advisors, EARNINGS per share, PERFORMANCE evaluation, EARNINGS forecasting, FINANCIAL management, FINANCIAL planning, OPTIMISM, FINANCIAL markets, PRICING, BAD news, ECONOMICS","English","1999-10-01","Journal of Finance (Wiley-Blackwell)","54"]
Description
A rational analysis of analyst behavior predicts that analysts immediately and without bias incorporate information into their forecasts. Several studies document analysts' tendency to systematically underreact to information. Underreaction is inconsistent with rationality. Other studies indicate that analysts systematically overreact to new information or that they are systematically optimistic. This study discriminates between these three hypotheses by examining the interaction between the nature of information and the type of reaction by analysts. The evidence indicates that analysts underreact to negative information, but overreact to positive information. These results are consistent with systematic optimism in response to information. [ABSTRACT FROM AUTHOR]
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