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We define a sentiment indicator based on option prices, valuation ratios and interest rates. The indicator can be interpreted as a lower bound on the expected growth in fundamentals that a rational investor would have to perceive in order to be happy to hold the market. The lower bound was...
Persistent link: https://www.econbiz.de/10012489383
We document that analysts cater to short-term investors by issuing optimistic target prices. Catering dominates among analysts at brokers without an investment banking arm as they face lower reputational cost. The market does not see through the analyst catering activity and their forecasts lead...
Persistent link: https://www.econbiz.de/10012937400
This study presents evidence suggesting that investors do not fully unravel predictable pessimism in sell-side analysts' earnings forecasts. We show that measures of prior consensus and individual analyst forecast pessimism are predictive of both the sign of firms' earnings surprises and the...
Persistent link: https://www.econbiz.de/10012937538
We provide a psychological explanation for the delayed price response to news about economically linked firms. We show that the return predictability of economically linked firms depends on the nearness to the 52-week high stock price. The interaction between news about economically linked firms...
Persistent link: https://www.econbiz.de/10012852966
We compare the stock return forecasting performance of alternative payout yields. The net payout yield produces more accurate forecasts relative to alternatives, including the traditional dividend yield. This remains true even after excluding several years during the Great Depression when...
Persistent link: https://www.econbiz.de/10012973823
We examine how the return predictability of deep learning models varies with stocks’ vulnerability to investors’ behavioral biases. Using an extensive list of anomaly variables, we find that the long-short strategy based on deep learning signals generates greater returns for stocks that are...
Persistent link: https://www.econbiz.de/10013302679
We investigate whether analysts' long-term growth (LTG) forecasts are a signal of analyst effort, which is reflected in the long-term profitability of their stock recommendations. We develop a one-year-ahead LTG forecast likelihood score and execute a trading strategy that generates average...
Persistent link: https://www.econbiz.de/10013094195
Mood-induced optimism, cognitive inaccuracy, and distraction can affect analyst forecasts. This study compares and contrasts these influences. The novelty of our approach is that we first show that these behavioural biases have different implications for analysts' forecast errors conditioned on...
Persistent link: https://www.econbiz.de/10012944174
We develop statistical methods to detect informed trading in options markets. We apply these methods to 31 companies from various sectors over 14 years analyzing approximately 9.6 million option prices. We find that option informed trading tends to cluster prior to certain events, takes place...
Persistent link: https://www.econbiz.de/10009314008
This appendix extends the empirical results in Chesney, Crameri, and Mancini (2011). Informed trading activities on put and call options are analyzed for 19 companies in the banking and insurance sectors from January 1996 to September 2009. Our empirical findings suggest that certain events such...
Persistent link: https://www.econbiz.de/10009314012