Intangible Information and Analyst Behavior
45 Pages Posted: 9 Mar 2011
Date Written: March 8, 2011
Abstract
In this paper, we study whether firm intangible information affects analyst behavior. We find direct evidence that when analysts make more judgment-intensive decisions, such as issuing stock recommendations, they overweight intangible information, leading to overreaction to intangible information. On the contrary, when analysts make less judgment-intensive decisions, such as earnings per share (EPS) forecasts, there is no such evidence of overreaction. More specifically, analyst recommendations are much more sensitive to intangible information, while EPS forecasts are more sensitive to tangible information. The sensitivity of long-term growth forecasts to intangible and tangible information fall in between. We also test and find that the overconfidence bias in analyst recommendations contributes to the market overreaction to intangible information. Our results appear to be consistent with the overconfidence hypothesis put forth by Daniel and Titman (2006).
Keywords: intangible information, overconfidence bias, analyst stock recommendations, earnings per share (EPS) forecasts
JEL Classification: G12, G14, G17, G24
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Can Investors Profit from the Prophets? Consensus Analyst Recommendations and Stock Returns
By Brad M. Barber, Reuven Lehavy, ...
-
Security Analysts' Career Concerns and Herding of Earnings Forecasts
By Jeffrey D. Kubik, Amit Solomon, ...
-
By Patricia Dechow, Amy P. Hutton, ...
-
Analyzing the Analysts: When Do Recommendations Add Value?
By Narasimhan Jegadeesh, Joonghyuk Kim, ...
-
An Empirical Analysis of Analysts' Target Prices: Short Term Informativeness and Long Term Dynamics
By Alon Brav and Reuven Lehavy
-
How Do Analysts Use Their Earnings Forecasts in Generating Stock Recommendations?