Investor attention to salient features of analyst forecasts

Athanasakou, Vasiliki E. and Simpson, Ana (2016) Investor attention to salient features of analyst forecasts. International Journal of Forecasting, 32 (4). pp. 1212-1233. ISSN 0169-2070

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Abstract

Prior research suggests that, when making economic decisions, investors focus on subsets of more salient information. We extend this research by examining variation in investor response to a salient feature in analyst forecasts. We focus on the roundness of analyst forecasts as a salient signal of imprecision. We examine whether: 1) investors notice rounding even though it is binary and has potentially limited information content, 2) investor reaction to rounding is affected by its repetition, and 3) investor reaction to rounding varies by investor type. We document a weaker market reaction to rounded compared to non-rounded forecasts, consistent with investors using rounding as an indicator of less precise forecasts. Investor response to rounding is more pronounced in the presence of multiple rounded forecasts, simultaneously disclosed in analyst reports, and is primarily attributed to less sophisticated investors. We also provide evidence on investors’ delayed assimilation of the information content in rounded forecasts subsequent to the forecast announcement date. Our results shed light on the scope of limited investor attention.

Item Type:	Article
Official URL:	http://www.journals.elsevier.com/international-jou...
Additional Information:	© 2016 International Institute of Forecasters
Divisions:	Accounting
Subjects:	H Social Sciences > HF Commerce > HF5601 Accounting
JEL classification:	G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies G - Financial Economics > G2 - Financial Institutions and Services > G29 - Other M - Business Administration and Business Economics; Marketing; Accounting > M4 - Accounting and Auditing > M41 - Accounting
Date Deposited:	15 Mar 2016 16:07
Last Modified:	14 Sep 2024 07:03
URI:	http://eprints.lse.ac.uk/id/eprint/65745

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