Investor attention to rounding as a salient forecast feature

Vasiliki Athanasakou, Ana Simpson

Forskningsoutput: TidskriftsbidragArtikelVetenskapligPeer review

4 Citeringar (Scopus)

Sammanfattning

Prior research suggests that investors focus on subsets of more salient information when making economic decisions. We extend this research by examining the variation in investor responses to a salient feature of 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 potentially has limited information content, (2) the investor reaction to rounding is affected by its repetition, and (3) the investor reaction to rounding varies by investor type. We document a weaker market reaction to rounded forecasts than to non-rounded forecasts, which is consistent with investors using rounding as an indicator of lower forecast precision. The investor response to rounding is more pronounced in the presence of multiple rounded forecasts, disclosed in analyst reports simultaneously, and is attributed primarily to less sophisticated investors. We also provide evidence of investors' delayed assimilation of the information contained in rounded forecasts subsequent to the forecast announcement date. Our results shed light on the scope of limited investor attention.
OriginalspråkEngelska
Referentgranskad vetenskaplig tidskriftInternational Journal of Forecasting
Volym32
Utgåva4
Sidor (från-till)1212-1233
Antal sidor22
ISSN0169-2070
DOI
StatusPublicerad - 2016
MoE-publikationstypA1 Originalartikel i en vetenskaplig tidskrift

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