Evidence on the Presence of Representativeness Bias in Investor Interpretation of Consistency in Sales Growth

• 成果类型: Article
• 署名作者: Ahmed, Anwer S.; Safdar, Irfan
• 署名单位: Texas A&M University System; Texas A&M University College Station; Mays Business School; University of North Carolina; University of North Carolina Greensboro
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2015.2326
• 发表日期: 2017
• 页码: 97-113
• 关键词: representativeness; behavioral finance; asset pricing; Fundamental analysis; STOCK RETURN PREDICTABILITY

摘要

We document that consistent patterns of high or low sales growth that are incongruent with underlying fundamentals are followed by significant stock price reversals. In contrast, no stock return reversals are found for firms that achieve the same level of sales growth in an inconsistent manner. Furthermore, future earnings announcement returns mimic the pattern of abnormal stock returns documented for the Consistent- and Inconsistent-Growth portfolios, respectively, corroborating our main findings. Our results are robust to controls for the magnitude of sales growth, fundamental strength, business cycle risk exposures, and standard risk factors. Our evidence is consistent with representativeness bias affecting investor interpretation of consistency in sales growth patterns.