Investor Reaction to Celebrity Analysts: The Case of Earnings Forecast Revisions

Bonner, Sarah; Hugon, Artur; Walther, Beverly R.

doi:10.1111/j.1475-679x.2007.00245.x

Cited by 121 publications

(97 citation statements)

References 67 publications

(110 reference statements)

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“…forecasts and salience (media coverage) levels, Bonner et al (2005) show that the investors' reactions to revisions of analysts' forecasts depend on the media coverage of these revisions. However, there are also crucial differences between information released by bookmakers and that released by equity-analysts.…”

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confidence: 91%

Information Salience, Investor Sentiment, and Stock Returns: The Case of British Soccer Betting

2008

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Soccer clubs listed on the London Stock Exchange provide a unique way of testing stock price reactions to different types of news. For each firm, two pieces of information are released on a weekly basis: experts' expectations about game outcomes through the betting odds, and the game outcomes themselves. The stock market reacts strongly to news about game results, generating significant abnormal returns and trading volumes. We find evidence that the abnormal returns for the winning teams do not reflect rational expectations but are high due to overreactions induced by investor sentiment. This is not the case for losing teams. There is no market reaction to the release of new betting information although these betting odds are excellent predictors of the game outcomes. The discrepancy between the strong market reaction to game results and the lack of reaction to betting odds may not only be the result from overreaction to game results but also from the lack of informational content or information salience of the betting information. Therefore, we also examine whether betting information can be used to predict short-run stock returns subsequent to the games. We reach mixed results: we conclude that investors ignore some non-salient public information such as betting odds, and betting information predicts a stock price overreaction to game results which is influenced by investors' mood (especially when the teams are strongly expected to win). JEL codes: G12, G14Keywords: information salience, investor sentiment, investor attention, sports betting, soccer, football, economics of sports, market efficiency ¶ We are grateful for the helpful comments from Laurent Calvet, Stijn Claessens, Gabrielle Demange, Piet Duffhues, Alex Edmans, Thierry Foucault, Francesco Franzoni, Diego García, Marc Goergen, Uli Hege, Kees Koedijk, Heinrich Isaac, Narasimhan Jegadeesh, Marina Martynova, Massimo Massa, Øyvind Norli, Evren Ors, Bruno Solnik, Jenke Ter Horst, Paul Tetlock, Chris Veld, Bas Werker and the participants to the NAKE Annual Meeting (Amsterdam), the Arne Ryde Workshop in Financial Economics (Lund), the ENTER Annual Meeting (Brussels), and the Western Finance Association (WFA) 2005 Annual Meeting (Portland). We also acknowledge the comments from the seminar participants at HEC Paris, and the universities of Sheffield, Tilburg and Warwick. The paper was previously circulated under the title "Stock price reactions to short-lived public information: the case of betting odds". Soccer clubs listed on the London Stock Exchange provide a unique way of testing stock price reactions to different types of news. For each firm, two pieces of information are released on a weekly basis: experts' expectations about game outcomes through the betting odds, and the game outcomes themselves. The stock market reacts strongly to news about game results, generating significant abnormal returns and trading volumes. We find evidence that the abnormal returns for the winning teams do not reflect rational expectations but are high due to ove...

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confidence: 91%

Information Salience, Investor Sentiment, and Stock Returns: The Case of British Soccer Betting

2008

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“…There is a possibility, however, that the implied resultant forecast accuracy of high media exposure may be as a result of investors' reacting more strongly to the recommendations of celebrity analysts. This viewpoint is buttressed by Bonner, et al (2007) who reveal that investors' response to the forecast revisions of analysts who are cited more frequently in the media is more pronounced due more to the popularity of these analysts and not necessarily to the exceptional quality of their performance.…”

Section: Correlation Between Forecast Accuracy Media Exposure and Sementioning

confidence: 99%

The Determinants of Sell-side Analysts’ Forecast Accuracy and Media Exposure

Sorogho

2017

Sriwijaya Int. J. of Dynamic Eco. And Buss.

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This study examines contributing factors to the differential forecasting abilities of sell-side analysts and the relation between the sentiments of these analysts and their media exposure. In particular, I investigate whether the level of optimism expressed in sell-side analysts' reports of fifteen constituents of primarily the S&P 500 Oil and Gas Industry1, enhance the media appearance of these analysts. Using a number of variables estimated from the I/B/E/S Detail history database, 15,455 analyst reports collected from Thompson Reuters Investext and analyst media appearances obtained from Dow Jones Factiva from 1999 to 2014, I run a multiple linear regression to determine the effect of independent variables on dependent variables. I find that an analyst's forecast accuracy (as measured by the errors inherent in his forecasts) is negatively associated with the analyst's level of media exposure, experience, brokerage size, the number of times he revises his forecasts in a year and the number of companies followed by the analyst, and positively associated with the analyst's level of optimism expressed in his reports, forecast horizon and the size of the company he follows.

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“…6 In my triple-difference specification, this measure is represented by a continuous variable that equals the average issuer age of issuances underwritten by a bank in an industry in a year.…”

Section: Underpricing and Valuation Risk Measuresmentioning

confidence: 99%

The Global Settlement, All-Star Analyst Departures and Their Impact on the Capital Markets

Mahaney-Walter

2015

SSRN Journal

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The Global Research Analyst Settlement prohibited twelve large investment banks from tying equity analysts' compensation to investment banking revenues, causing a large number of Institutional Investor "all-star" analysts to exit the sell-side industry. Using a difference-in-differences specification, I find that the departure of all-stars caused their bank-industry underwriting groups to lose equity issuance market share. Market share losses were more severe for IPOs than for IPOs and follow-on underwritings combined. The higher the average quality of all-stars in a bank-industry, the more severe were the bank-industry's losses. Additionally, the departure of all-stars raised the cost of equity capital for IPOs underwritten by their bank-industry groups, particularly for IPOs that were more difficult to value. Ultimately, the loss of sell-side research talent, an unintended consequence of regulation, forced issuers to accept research coverage of inferior quality, raising the cost of obtaining public capital. Degree Type DissertationDegree Name

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Investor Reaction to Celebrity Analysts: The Case of Earnings Forecast Revisions

Cited by 121 publications

References 67 publications

Information Salience, Investor Sentiment, and Stock Returns: The Case of British Soccer Betting

Information Salience, Investor Sentiment, and Stock Returns: The Case of British Soccer Betting

The Determinants of Sell-side Analysts’ Forecast Accuracy and Media Exposure

The Global Settlement, All-Star Analyst Departures and Their Impact on the Capital Markets

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