519
Views
2
CrossRef citations to date
0
Altmetric
Articles

Confirmation Bias in Analysts’ Response to Consensus Forecasts

, &

References

  • Aharoni, Gil, Eti Einhorn, and Qi Zeng. 2017. “Under Weighting of Private Information by Top Analysts.” Journal of Accounting Research 55 (3):551–90. doi:10.1111/1475-679X.12152
  • Andrews, Rodney J., Trevon D. Logan, and Michael J. Sinkey. 2018. “Identifying Confirmatory Bias in the Field: Evidence from a Poll of Experts.” Journal of Sports Economics 19 (1):50–81. doi:10.1177/1527002515617511
  • Barberis, Nicholas, Andrei Shleifer, and Robert Vishny. 1998. “A Model of Investor Sentiment.” Journal of Financial Economics 49 (3):307–43. doi:10.1016/S0304-405X(98)00027-0
  • Bernhardt, D., M. Campello, and E. Kutsoati. 2006. “Who Herds?” Journal of Financial Economics 80 (3):657–75. doi:10.1016/j.jfineco.2005.07.006
  • Beyer, A., and I. Guttman. 2011. “The Effect of Trading Volume on Analysts’ Forecast Bias.” The Accounting Review 86 (2):451–81. doi:10.2308/accr.00000030
  • Brown, L., A. Call, M. Clement, and N. Sharp. 2015. “Inside the ‘Black Box’ of Sell-Side Financial Analysts.” Journal of Accounting Research 53 (1):1–47. doi:10.1111/1475-679X.12067
  • Bruner, J., and M. Potter. 1964. “Interference in Visual Recognition.” Science (New York, N.Y.) 144 (3617):424–5. doi:10.1126/science.144.3617.424
  • Cen, Ling, Gilles Hilary, and K. C John Wei. 2013. “The Role of Anchoring Bias in the Equity Market: Evidence from Analysts’ Earnings Forecasts and Stock Returns.” Journal of Financial and Quantitative Analysis 48 (1):47–76. doi:10.1017/S0022109012000609
  • Chang, Yen-Cheng, and Hung-Wen Cheng. 2015. “Information Environment and Investor Behavior.” Journal of Banking & Finance 59:250–64. doi:10.1016/j.jbankfin.2015.06.013
  • Charness, G., and C. Dave. 2017. “Confirmation Bias with Motivated Beliefs.” Games and Economic Behavior 104:1–23. doi:10.1016/j.geb.2017.02.015
  • Chen, Q., and W. Jiang. 2006. “Analysts’ Weighting of Private and Public Information.” The Review of Financial Studies 19 (1):319–55. doi:10.1093/rfs/hhj007
  • Clement, B., J. Hales, and Y. Xue. 2011. “Understanding Analysts’ Use of Stock Returns and Other Analysts’ Revisions When Forecasting Earnings.” Journal of Accounting and Economics 51 (3):279–99. doi:10.1016/j.jacceco.2010.11.001
  • Clement, B., and Y. Tse. 2005. “Financial Analyst Characteristics and Herding Behavior in Forecasting.” The Journal of Finance 60 (1):307–41. doi:10.1111/j.1540-6261.2005.00731.x
  • Cowen, Amanda, Boris Groysberg, and Paul Healy. 2006. “Which Types of Analyst Firms Are More Optimistic?” Journal of Accounting and Economics 41 (1–2):119–46. doi:10.1016/j.jacceco.2005.09.001
  • Da, Zhi, and Xing Huang. 2020. “Harnessing the Wisdom of Crowds.” Management Science 66 (5):1847–67. doi:10.1287/mnsc.2019.3294
  • Daniel, K., D. Hirshleifer, and A. Subrahmanyam. 1998. “Investor Psychology and Security Market under- and Overreactions.” The Journal of Finance 53 (6):1839–85. doi:10.1111/0022-1082.00077
  • Darley, J., and P. Gross. 1983. “A Hypothesis-Confirming Bias in Labeling Effects.” Journal of Personality and Social Psychology 44 (1):20–33. doi:10.1037/0022-3514.44.1.20
  • DellaVigna, S., and J. M. Pollet. 2009. “Investor Inattention and Friday Earnings Announcements.” The Journal of Finance 64 (2):709–49. doi:10.1111/j.1540-6261.2009.01447.x
  • Easterwood, J. C., and S. R. Nut. 1999. “Inefficiency in Analysts’ Earnings Forecasts: Systematic Misreaction or Systematic Optimism?” The Journal of Finance 54 (5):1777–97. doi:10.1111/0022-1082.00166
  • Ellis, Geoffrey. ed. 2018. Cognitive Biases in Visualizations. New York, NY, USA: Springer.
  • Forsythe, R., F. Nelson, G. R. Neumann, and J. Wright. 1992. “Anatomy of an Experimental Political Stock Market.” The American Economic Review 82 (5):1142–61.
  • Furnham, A., and H. Boo. 2011. “A Literature Review of the Anchoring Effect.” The Journal of Socio-Economics 40 (1):35–42. doi:10.1016/j.socec.2010.10.008
  • Gervais, S., and T. Odean. 2001. “Learning to Be Overconfident.” Review of Financial Studies 14 (1):1–27. doi:10.1093/rfs/14.1.1
  • Gigerenzer, Gerd, and Klaus Hug. 1992. “Domain-Specific Reasoning: Social Contracts, Cheating, and Perspective Change.” Cognition 43 (2):127–71. doi:10.1016/0010-0277(92)90060-U
  • Gleason, C. A., and C. M. Lee. 2003. “Analyst Forecast Revisions and Market Price Discovery.” The Accounting Review 78 (1):193–225.
  • Grether, D. M. 1980. “Bayes Rule as a Descriptive Model: The Representativeness Heuristic.” The Quarterly Journal of Economics 95 (3):537–57. doi:10.2307/1885092
  • Griffin, D., and A. Tversky. 1992. “The Weighing of Evidence and the Determinants of Overconfidence.” Cognitive Psychology 24 (3):411–35. doi:10.1016/0010-0285(92)90013-R
  • Griggs, R. A., and J. R. Cox. 1982. “The Elusive Thematic-Materials Effect in Wason’s Selection Task.” British Journal of Psychology 73 (3):407–20. doi:10.1111/j.2044-8295.1982.tb01823.x
  • Hilary, Gilles, and Lior Menzly. 2006. “Does past Success Lead Analysts to Become Overconfident?” Management Science 52 (4):489–500. doi:10.1287/mnsc.1050.0485
  • Hilton, D. J. 2001. “The Psychology of Financial Decision-Making: Applications to Trading, Dealing, and Investment Analysis, The.” Journal of Psychology and Financial Markets 2 (1):37–53. doi:10.1207/S15327760JPFM0201_4
  • Hirshleifer, D., Y. Levi, B. Lourie, and S. H. Teoh. 2019. “Decision Fatigue and Heuristic Analyst Forecasts.” Journal of Financial Economics 133 (1):83–98. doi:10.1016/j.jfineco.2019.01.005
  • Hirshleifer, D., S. Lim, and S. H. Teoh. 2009. “Driven to Distraction: Extraneous Events and Underreaction to Earnings News.” The Journal of Finance 64 (5):2289–325. doi:10.1111/j.1540-6261.2009.01501.x
  • Hirshleifer, D., B. Lourie, T. Ruchti, and P. Truong. 2021. “First Impressions Bias: Evidence from Analyst Forecast.” Review of Finance 25 (2):325–64. doi:10.1093/rof/rfaa015
  • Huang, R., M. Krishnan, J. Shon, and P. Zhou. 2017. “Who Herds? Who Doesn’t? Estimates of Analysts’ Herding Propensity in Forecasting Earnings.” Contemporary Accounting Research 34 (1):374–99. doi:10.1111/1911-3846.12236
  • Hugon, A., and V. Muslu. 2010. “Market Demand for Conservative Analysts.” Journal of Accounting and Economics 50 (1):42–57. doi:10.1016/j.jacceco.2010.01.001
  • Jegadeesh, N., and W. Kim. 2010. “Do Analysts Herd? An Analysis of Recommendations and Market Reactions.” Review of Financial Studies 23 (2):901–37. ‐doi:10.1093/rfs/hhp093
  • Jiang, Danling, Alok Kumar, and Kelvin K. F. Law. 2016. “Political Contributions and Analyst Behavior.” Review of Accounting Studies 21 (1):37–88. doi:10.1007/s11142-015-9344-9
  • Kolasinski, Adam C., and S. P. Kothari. 2008. “Investment Banking and Analyst Objectivity: Evidence from Analysts Affiliated with Mergers and Acquisitions Advisors.” Journal of Financial and Quantitative Analysis 43 (4):817–42. doi:10.1017/S0022109000014368
  • Kretz, Donald R. 2018. “Experimentally Evaluating Bias-Reducing Visual Analytics Techniques in Intelligence Analysis.” In Cognitive Biases in Visualizations, edited by Geoffrey Ellis, 111–35. Cham: Springer.
  • La Porta, R. 1996. “Expectations and the Cross‐Section of Stock Returns.” The Journal of Finance 51 (5):1715–42. doi:10.1111/j.1540-6261.1996.tb05223.x
  • Legoux, R., P. M. Leger, J. Robert, and M. Boyer. 2014. “Confirmation Biases in the Financial Analysis of IT Investments.” Journal of the Association for Information Systems 15 (1):33–52. doi:10.17705/1jais.00350
  • Lopes, L. L. 1994. “Psychology and Economics: Perspectives on Risk, Co-Operation and the Marketplace.” Annual Review of Psychology 45 (1):197–227. doi:10.1146/annurev.ps.45.020194.001213
  • Lord, C., L. Ross, and M. Lepper. 1979. “Biased Assimilation and Attitude Polarization: The Effects of Prior Theories on Subsequently Considered Evidence.” Journal of Personality and Social Psychology 37 (11):2098–109. doi:10.1037/0022-3514.37.11.2098
  • Malmendier, U., and D. Shanthikumar. 2014. “Do Security Analysts Speak in Two Tongues?” Review of Financial Studies 27 (5):1287–322. doi:10.1093/rfs/hhu009
  • Michaely, R., and K. L. Womack. 1999. “Conflict of Interest and the Credibility of Underwriter Analyst Recommendations.” Review of Financial Studies 12 (4):653–86. doi:10.1093/rfs/12.4.653
  • Minardi, S., and A. Savochkin. 2019. “Subjective Contingencies and Limited Bayesian Updating.” Journal of Economic Theory 183:1–45. doi:10.1016/j.jet.2019.05.007
  • Moore, D. A., and P. J. Healy. 2008. “The Trouble with Overconfidence.” Psychological Review 115 (2):502–17. doi:10.1037/0033-295X.115.2.502
  • Morewedge, K., and D. Kahneman. 2010. “Associative Processes in Intuitive Judgment.” Trends in Cognitive Sciences 14 (10):435–40. doi:10.1016/j.tics.2010.07.004
  • Nickerson, R. S. 1998. “Confirmation Bias: A Ubiquitous Phenomenon in Many Guises.” Review of General Psychology 2 (2):175–220. doi:10.1037/1089-2680.2.2.175
  • Park, J., P. Konana, B. Gu, A. Kumar, and R. Raghunathan. 2013. “Information Valuation and Confirmation Bias in Virtual Communities: Evidence from Stock Message Boards.” Information Systems Research 24 (4):1050–67. doi:10.1287/isre.2013.0492
  • Park, C. W., and E. K. Stice. 2000. “Analyst Forecasting Ability and the Stock Price Reaction to Forecast Revisions.” Review of Accounting Studies 5 (3):259–72. doi:10.1023/A:1009668711298
  • Plous, Scott. 1991. “Biases in the Assimilation of Technological Breakdowns: Do Accidents Make us Safer?” Journal of Applied Social Psychology 21 (13):1058–82. doi:10.1111/j.1559-1816.1991.tb00459.x
  • Pouget, S., J. Sauvagnat, and S. Villeneuve. 2017. “A Mind is a Terrible Thing to Change: confirmatory Bias in Financial Markets.” The Review of Financial Studies 30 (6):2066–109. doi:10.1093/rfs/hhw100
  • Rabin, M., and J. L. Schrag. 1999. “First Impressions Matter: A Model of Confirmatory Bias.” The Quarterly Journal of Economics 114 (1):37–82. doi:10.1162/003355399555945
  • Richardson, S., S. H. Teoh, and P. D. Wysocki. 2004. “The Walk‐down to Beatable Analyst Forecasts: The Role of Equity Issuance and Insider Trading Incentives.” Contemporary Accounting Research 21 (4):885–924. doi:10.1506/KHNW-PJYL-ADUB-0RP6
  • Stickel, S. E. 1992. “Reputation and Performance among Security Analysts.” The Journal of Finance 47 (5):1811–36. doi:10.1111/j.1540-6261.1992.tb04684.x
  • Tversky, A., and D. Kahneman. 1974. “Judgment under Uncertainty: Heuristics and Biases: Biases in Judgments Reveal Some Heuristics of Thinking under Uncertainty.” Science 185 (4157):1124–31. doi:10.1126/science.185.4157.1124
  • Wason, P. C. 1960. “On the Failure to Eliminate Hypotheses in a Conceptual Task.” The Quarterly Journal of Experimental Psychology 12 (3):129–40. doi:10.1080/17470216008416717
  • Wason, P. C., and P. N. Johnson-Laird. 1972. The Psychology of Reasoning: Structure and Content. London: Batsford.
  • Wyatt, F., and T. Campbell. 1951. “On the Liability of Stereotype or Hypothesis.” The Journal of Abnormal and Social Psychology 46 (4):496–500. doi:10.1037/h0054690

Reprints and Corporate Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

To request a reprint or corporate permissions for this article, please click on the relevant link below:

Academic Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

Obtain permissions instantly via Rightslink by clicking on the button below:

If you are unable to obtain permissions via Rightslink, please complete and submit this Permissions form. For more information, please visit our Permissions help page.