Behavioral bias in number processing: Evidence from analysts' expectations

Détails

ID Serval
serval:BIB_F3387600C665
Type
Article: article d'un périodique ou d'un magazine.
Collection
Publications
Titre
Behavioral bias in number processing: Evidence from analysts' expectations
Périodique
Journal of Economic Behavior & Organization
Auteur(s)
Roger T., Roger P., Schatt A.
ISSN
0167-2681
Statut éditorial
Publié
Date de publication
05/2018
Peer-reviewed
Oui
Volume
149
Numéro
315-331
Pages
315-331
Langue
anglais
Résumé
Research in neuropsychology shows that individuals process small and large numbers differently. Small numbers are processed on a linear scale, while large numbers are processed on a logarithmic scale. In this paper, we show that financial analysts process small prices and large prices differently. When they are optimistic (pessimistic), analysts issue more optimistic (pessimistic) target prices for small price stocks than for large price stocks. Our results are robust when controlling for the usual risk factors such as size, book-to-market, momentum, profitability and investments. They are also robust when we control for firm and analyst characteristics, or for other biases such as the 52-week high bias, the preference for lottery-type stocks and positive skewness, and the analyst tendency to round numbers. Finally, we show that analysts become more optimistic after stock splits. Overall, our results suggest that a deeply-rooted behavioral bias in number processing drives analysts’ return expectations.
Mots-clé
Economics and Econometrics, Organizational Behavior and Human Resource Management
Web of science
Création de la notice
01/03/2018 16:46
Dernière modification de la notice
20/08/2019 17:20
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