Heterogeneous overreaction in expectation formation: Evidence and theory

• 成果类型: Article
• 署名作者: Chen, Heng; Li, Xu; Pei, Guangyu; Xin, Qian
• 署名单位: University of Hong Kong; Chinese University of Hong Kong; Harbin Institute of Technology
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2024.105839
• 发表日期: 2024
• 关键词: Overreaction; Expectation formation; Managerial guidance; asymmetry; Non-monotone; ambiguity aversion

摘要

Using firm-level earnings forecasts and managerial guidance data, we construct guidance surprises for analysts, i.e., differences between managerial guidance and analysts' initial forecasts. We document new evidence on expectation formation: (i) analysts overreact to managerial guidance and the overreaction is state-dependent, i.e., it is stronger for negative guidance surprises but weaker for surprises that are larger in size; and (ii) forecast revisions are neither symmetric in guidance surprises nor monotonic. We organize these facts with a model where analysts are uncertain about the quality of managerial guidance. We show that a reasonable degree of ambiguity aversion is necessary to account for the documented heterogeneous overreaction pattern.