Prospect theory, analyst forecasts, and stock returns
This paper documents how prospect theory can be used to explain stock returns and analysts’ forecast behavior. Positive earnings surprises are associated with increases in abnormal returns but negative earnings surprises have only a limited negative impact on returns. We find that analysts display a...
Saved in:
Main Author: | |
---|---|
Format: | text |
Language: | English |
Published: |
Institutional Knowledge at Singapore Management University
2003
|
Subjects: | |
Online Access: | https://ink.library.smu.edu.sg/lkcsb_research/738 https://ink.library.smu.edu.sg/lkcsb_research/1158/ |
Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
Institution: | Singapore Management University |
Language: | English |
id |
sg-smu-ink.lkcsb_research-1737 |
---|---|
record_format |
dspace |
spelling |
sg-smu-ink.lkcsb_research-17372022-01-03T07:29:41Z Prospect theory, analyst forecasts, and stock returns DING, David K. This paper documents how prospect theory can be used to explain stock returns and analysts’ forecast behavior. Positive earnings surprises are associated with increases in abnormal returns but negative earnings surprises have only a limited negative impact on returns. We find that analysts display asymmetric behavior towards positive and negative earnings growth. Analysts’ forecasts are found to be accurate during periods of positive earnings growth, but overly optimistic during periods of negative earnings growth. Our findings have implications for the structuring of investment products, as well as the role of market timing in their introduction. See journal article version at https://ink.library.smu.edu.sg/lkcsb_research/1158/ 2003-12-01T08:00:00Z text https://ink.library.smu.edu.sg/lkcsb_research/738 https://ink.library.smu.edu.sg/lkcsb_research/1158/ Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University Behavioral finance Prospect theory Analyst forecasts Earnings growth Earnings Surprises Underreaction Trends Business Corporate Finance Finance and Financial Management |
institution |
Singapore Management University |
building |
SMU Libraries |
continent |
Asia |
country |
Singapore Singapore |
content_provider |
SMU Libraries |
collection |
InK@SMU |
language |
English |
topic |
Behavioral finance Prospect theory Analyst forecasts Earnings growth Earnings Surprises Underreaction Trends Business Corporate Finance Finance and Financial Management |
spellingShingle |
Behavioral finance Prospect theory Analyst forecasts Earnings growth Earnings Surprises Underreaction Trends Business Corporate Finance Finance and Financial Management DING, David K. Prospect theory, analyst forecasts, and stock returns |
description |
This paper documents how prospect theory can be used to explain stock returns and analysts’ forecast behavior. Positive earnings surprises are associated with increases in abnormal returns but negative earnings surprises have only a limited negative impact on returns. We find that analysts display asymmetric behavior towards positive and negative earnings growth. Analysts’ forecasts are found to be accurate during periods of positive earnings growth, but overly optimistic during periods of negative earnings growth. Our findings have implications for the structuring of investment products, as well as the role of market timing in their introduction. See journal article version at https://ink.library.smu.edu.sg/lkcsb_research/1158/ |
format |
text |
author |
DING, David K. |
author_facet |
DING, David K. |
author_sort |
DING, David K. |
title |
Prospect theory, analyst forecasts, and stock returns |
title_short |
Prospect theory, analyst forecasts, and stock returns |
title_full |
Prospect theory, analyst forecasts, and stock returns |
title_fullStr |
Prospect theory, analyst forecasts, and stock returns |
title_full_unstemmed |
Prospect theory, analyst forecasts, and stock returns |
title_sort |
prospect theory, analyst forecasts, and stock returns |
publisher |
Institutional Knowledge at Singapore Management University |
publishDate |
2003 |
url |
https://ink.library.smu.edu.sg/lkcsb_research/738 https://ink.library.smu.edu.sg/lkcsb_research/1158/ |
_version_ |
1770569668735533056 |