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Economic forecasts, anchoring bias, and stock returns
Resource type
Authors/contributors
- Birz, Gene (Author)
- Dutta, Sandip (Author)
- Yu, Han (Author)
Title
Economic forecasts, anchoring bias, and stock returns
Abstract
By utilizing survey forecasts of macroeconomic statistics, we find that market participants’ expectations are not rational as they exhibit an anchoring bias. The forecasts systematically underpredict macroeconomic statistics and the forecast errors are predicted by past macroeconomic announcements. Most importantly, we find that the stock market does not see through this bias, that is, we find statistically significant stock price effects of “anticipated” components of macroeconomic announcements. Investors overweight the importance of historical information and do not make sufficient adjustments after the arrival of new information. © 2021 Financial Management Association International
Publication
Financial Management
Date
2021-06-07, June 2021
Volume
51
Issue
1
Pages
169-191
Citation Key
ISSN
0046-3892
Language
english
Extra
6 citations (Crossref) [2023-10-31]
Citation
Birz, G., Dutta, S., & Yu, H. (2021). Economic forecasts, anchoring bias, and stock returns. Financial Management, 51(1), 169–191. https://doi.org/10.1111/fima.12355
Department
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