Abstract In this paper, we examine the relation between stock returns and analysts' heterogeneous expectations. We find that are positively associated with divergence of opinion. Our evidence provides no support for Miller's (1977) overvaluation hypothesis, which predicts lower (higher) future high (low) opinion stocks in presence short-selling constraints. findings based on use diversity measure, is free from confounding effects uncertainty forecasts therefore a more accurate measure than...

ABSTRACT Several empirical studies show that investment strategies favor the purchase of stocks with low prices relative to conventional measures value yield higher returns. Some these imply investors are too optimistic about (glamour) have had good performance in recent past and pessimistic (value) performed poorly. We examine whether systematically overestimate (underestimate) future earnings glamour over 1976 1997 period. Our results fail support extrapolation hypothesis posits superior...

Abstract In this paper we examine the relation between equity mispricing and arbitrage risk find that stocks with high have higher estimated than low risk. These results are not limited to book-to-market or small capitalization stocks, they sensitive transaction short-selling costs. addition, remain robust alternative multifactor return generating specification models measures. Overall, our empirical consistent conjecture is a manifestation of inability arbitrageurs hedge idiosyncratic risk,...

Reexamining CEO personality traits from a real options theory perspective, we suggest that the firm's strategic flexibility can be worsened by conscientiousness and neuroticism. We use measure of as ability to take advantage heightened volatility, which then results in superior stock returns. Our adaptability is impeded rigid planning, resistance change (conscientiousness) lack emotional stability (neuroticism). For firms experience decrease opposite holds. In line with trait activation...

We appraise the monitoring activity of security analysis from perspective manager–shareholder conflict. Using a data set more than 7,000 company-year observations for manufacturing companies tracked by analysts over 1988–94 period, we found that acts as monitor to reduce agency costs associated with separation ownership and control. also found, however, are effective in reducing managerial non-value-maximizing behavior single-segment multisegment companies. In addition, shareholder gains larger

Abstract We find that excessively high levels of press coverage can significantly exaggerate stock price deviation from fundamental value. show being “in the news” a lot is associated with both greater liquidity and more information risk. When we examine signed mispricing, effect abnormal significant only for stocks relative valuations, consistent concurrent existences media‐induced sentiment media bias. Indeed, uncover attenuated when firms low valuations receive heavy in local press.

We find that positive excess (strong) analyst coverage is associated with overvaluation and low future returns. This finding consistent the view excessive coverage, driven by investment banking incentives self-interests, raises investor optimism causing share prices to trade above fundamental value. However, weak causes stocks below values. indicates investors tend believe these firms are more likely be plagued information asymmetries agency problems. The results remain robust after...

The study we report examined herding behavior among security analysts in the 1980–98 period. Using panel data, analyzed impact of industrial and geographical diversification on analysts. We compared propensity toward covering domestic companies that are industrially focused focusing diversified geographically and/or industrially. provide evidence is more pronounced concentrating companies. This result consistent with notion increases task difficulty. Our results also show reduces market...