The Role of Anchoring Bias in the Equity Market

2010 ◽  
Author(s):  
Ling Cen ◽  
Gilles Hilary ◽  
K. C. John Wei ◽  
Jie Zhang
Keyword(s):  
Equity Market ◽  
Anchoring Bias

scholarly journals The Role of Anchoring Bias in the Equity Market: Evidence from Analysts’ Earnings Forecasts and Stock Returns

2012 ◽  
Vol 48 (1) ◽  
pp. 47-76 ◽  
Author(s):  
Ling Cen ◽  
Gilles Hilary ◽  
K. C. John Wei
Keyword(s):  
Stock Returns ◽  
Earnings Forecasts ◽  
Equity Market ◽  
Stock Splits ◽  
Forecast Errors ◽  
Forecast Revisions ◽  
Earnings Per Share ◽  
Earnings Surprises ◽  
Anchoring Bias

AbstractWe test the implications of anchoring bias associated with forecast earnings per share (FEPS) for forecast errors, earnings surprises, stock returns, and stock splits. We find that analysts make optimistic (pessimistic) forecasts when a firm’s FEPS is lower (higher) than the industry median. Further, firms with FEPS greater (lower) than the industry median experience abnormally high (low) future stock returns, particularly around subsequent earnings announcement dates. These firms are also more likely to engage in stock splits. Finally, split firms experience more positive forecast revisions, more negative forecast errors, and more negative earnings surprises after stock splits.

The role of buy-side anchoring bias: Evidence from the real estate market

2016 ◽  
Vol 38 ◽  
pp. 34-58 ◽  
Author(s):  
Chuang-Chang Chang ◽  
Ching-Hsiang Chao ◽  
Jin-Huei Yeh
Keyword(s):  
Real Estate ◽  
Real Estate Market ◽  
The Real ◽  
The Real Estate ◽  
The Real Estate Market ◽  
Anchoring Bias

Taxonomy and Epidemiology of Error in Radiology

2019 ◽  
pp. 29-74
Author(s):  
Michael A. Bruno
Keyword(s):  
Working Memory ◽  
Cognitive Biases ◽  
Confirmation Bias ◽  
Diagnostic Error ◽  
Attentional Focus ◽  
Relative Contribution ◽  
Anchoring Bias ◽  
Classification Of Error

This chapter provides an overview of the prevalence and classification of error types in radiology, including the frequency and types of errors made by radiologists. We will review the relative contribution of perceptual error—in which findings are simply not seen—as compared to other common types of error. This error epidemiology will be considered in the light of the underlying variability and uncertainties present in the radiological process. The role of key cognitive biases will also be reviewed, including anchoring bias, confirmation bias, and availability bias. The role of attentional focus, working memory, and problems caused by fatigue and interruption will also be explored. Finally, the problem of radiologist error will be considered in the context of the overall problem of diagnostic error in medicine.

The Role of Accounting Conservatism in the Equity Market: Evidence from Seasoned Equity Offerings

2013 ◽  
Vol 88 (4) ◽  
pp. 1327-1356 ◽  
Author(s):  
Yongtae Kim ◽  
Siqi Li ◽  
Carrie Pan ◽  
Luo Zuo
Keyword(s):  
Negative Impact ◽  
Seasoned Equity Offerings ◽  
Equity Market ◽  
Accounting Conservatism ◽  
Data Availability ◽  
Equity Offerings ◽  
Market Reactions ◽  
Conservative Accounting ◽  
Financing Costs

ABSTRACT Using seasoned equity offerings (SEOs) from 1989 to 2008, we examine the role of accounting conservatism in the equity market. We find that issuers with a greater degree of conservatism experience fewer negative market reactions to SEO announcements. We further show that an important mechanism through which conservatism affects SEO announcement returns is by mitigating the negative impact of information asymmetry. Additional analyses suggest that our results are not driven by the effects of other forms of corporate governance. We also find evidence that conservative issuers continue to use conservative accounting after the equity offerings. Taken together, our findings are consistent with the argument that accounting conservatism reduces financing costs in SEOs. Data Availability: Data used in this study are available from public sources identified in the study.

scholarly journals Investor Sentiment: Too Contagious to Ignore?

2017 ◽  
Vol 4 (1) ◽  
pp. 57
Author(s):  
Amar Soebhag
Keyword(s):  
Financial Crises ◽  
Inverse Relationship ◽  
Investor Sentiment ◽  
Equity Markets ◽  
Equity Market ◽  
Multivariate Garch ◽  
Financial Contagion ◽  
The Relationship

This article empirically investigates the role of investor sentiment as a determinant of financial contagion during crises periods. The focus is on developed equity markets as well as emerging equity markets during 1990-2015. By using a multivariate GARCH methodology, cross-equity market correlations are documented to be substantially increasing during financial crises. Investor sentiment is negatively related cross-equity market correlation. This inverse relationship becomes even stronger during times of financial crises, indicating the existence of financial contagion. This finding can be motivated by loss-averse and ambiguity-averse investors in equity markets. The relationship between investor sentiment and cross-equity market correlation persists after controlling for trade linkages, financial linkages, and other macroeconomic similarities between countries. The findings are robust to changes in crises definition.

Performance of VC/PE-backed IPOs: New Insights from India

2020 ◽  
pp. 097215092095054
Author(s):  
Soumya G. Deb ◽  
Pradip Banerjee
Keyword(s):  
Initial Public Offerings ◽  
Private Equity ◽  
Operating Performance ◽  
Equity Market ◽  
Venture Capitalists ◽  
Public Offerings ◽  
Market Perception ◽  
Using Data

This article explores long-term equity and operating performance of Indian firms issuing initial public offerings (IPOs) backed by venture capital/private equity (VC/PE) funding. Using data for 173 IPOs backed by VC/PE funding during 2000–2016, the article shows that equity market performance of VC/PE-backed IPOs is unimpressive post issue, compared to their peers. This is not only due to market perception but also associated with a declining operating performance. However, information asymmetry, mispricing and ‘timing the market’ by issuing firms do not seem to be the reasons for such long-term underperformance. We argue that it may be a case of too much money chasing too few winners for Indian IPOs and individual rent-seeking activities by managers. The observation raises the question of effectiveness of the monitoring role of venture capitalists or PE funders post the IPO in an Indian context. This is substantiated by our additional finding that sustained monitoring and hand-holding by venture capitalists and PE funders post the IPO cause an improvement in performance. The findings of this study can have significant implications for all stakeholders, particularly common investors in the Indian equity market.

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