Misforecasting Earnings: Management Expectations and Capital Market Anomalies

Speaker：Dexin Zhou (Assistant Professor, Baruch School of Business, City University of New York)

Host：Zhu Xiaoyu, Assistant Professor, Lingnan College

Time and Date：14:30, Jun. 25, 2023

Venue: Lingnan Hall third floor lecture hall(302)

Language: English + Chinese

Abstract:

Management earnings forecasts are more pessimistic for stocks with higher predicted returns based on anomaly signals, suggesting anomaly captures biases in managers' forecasts. These biases in management forecasts are more severe than those in analyst forecasts. These findings are stronger for overconfident managers, long-term forecasts, and during high sentiment periods, consistent with behavioral issues driving such biases. The results are not affected by the subsequent insider or firm trading, indicating strategic reporting is unlikely to drive these biases. Finally, biased management forecasts amplify and prolong anomaly returns, consistent with exacerbated errors in investor expectations of future cash flow. 

Profile of the speaker:

Prof. Dexin Zhou received his bachelor’s degree from Bard (09’) and PhD in Finance from Emory University’s Goizueta School of Business. His research interests are mainly in behavioral finance, empirical asset pricing and institutional investors. His research work has been featured in The Economist, Financial Times and Wall Street Journal.