Journal ArticleDOI
A direct test of the cognitive bias theory of share price reversals
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TLDR
The cognitive bias theory of share price reversals predicts that the market forms overly optimistic (pessimistic) earnings expectations for firms that experienced high (low) stock returns as mentioned in this paper.Citations
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Capital markets research in accounting
TL;DR: This paper reviewed empirical research on the relation between capital markets and financial statements and found that the principal sources of demand for capital markets research in accounting are fundamental analysis and valuation, tests of market efficiency, and the role of accounting numbers in contracts and the political process.
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Management's Incentives to Avoid Negative Earnings Surprises
TL;DR: This paper found that firms with higher transient institutional ownership, greater reliance on implicit claims with their stakeholders, and higher value-relevance of earnings are more likely to meet or exceed expectations at the earnings announcement.
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Rationality and Analysts' Forecast Bias
TL;DR: In this article, a quadratic-loos utility function was proposed and tested for modeling corporate earnings forecasting, where financial analysts trade off bias to improve management access and forecast accuracy.
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Tests of Analysts' Overreaction/Underreaction to Earnings Information as an Explanation for Anomalous Stock Price Behavior
TL;DR: In this article, the authors examined whether security analysts underreact or overreact to prior earnings information, and whether any such behavior could explain previously documented anomalous stock price movements, and they concluded that security analysts' behavior is at best only a partial explanation for stock price underreaction to earnings, and may be unrelated to stock price overreactions.
Journal ArticleDOI
Capital Markets Research in Accounting
TL;DR: This paper reviewed empirical research on the relation between capital markets and financial statements and found that the principal sources of demand for capital markets research in accounting are fundamental analysis and valuation, tests of market efficiency, and the role of accounting numbers in contracts and the political process.
References
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Does the Stock Market Overreact
TL;DR: In this article, a study of market efficiency investigates whether people tend to "overreact" to unexpected and dramatic news events and whether such behavior affects stock prices, based on CRSP monthly return data, is consistent with the overreaction hypothesis.
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Noise Trader Risk in Financial Markets
TL;DR: In this article, the authors present a simple overlapping generations model of an asset market in which irrational noise traders with erroneous stochastic beliefs both affect prices and earn higher expected returns.
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Permanent and Temporary Components of Stock Prices
Eugene F. Fama,Kenneth R. French +1 more
TL;DR: This article found that a slowly mean-reverting component of stock prices tends to induce negative autocorrelation in returns, which is weak for the daily and weekly holding periods common in market efficiency tests but stronger for long-horizon returns.
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Further Evidence On Investor Overreaction and Stock Market Seasonality
TL;DR: In this paper, additional evidence is reported that supports the overreaction hypothesis and that is inconsistent with two alternative hypotheses based on firm size and differences in risk, as measured by CAPM-betas.
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Predicting returns in the stock and bond markets
TL;DR: The authors found that the returns on small-firm stocks and low-grade bonds are more highly correlated in January than in the rest of the year with previous levels of asset prices.