Overconfident institutions and their self-attribution bias: Evidence from earnings announcements

Chou, Hsin-I, Li, Mingyi, Yin, Xiangkang and Zhao, Jing 2020, Overconfident institutions and their self-attribution bias: Evidence from earnings announcements, Journal of Financial and Quantitative Analysis, doi: 10.1017/S002210902000037X.

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Title Overconfident institutions and their self-attribution bias: Evidence from earnings announcements
Author(s) Chou, Hsin-I
Li, Mingyi
Yin, XiangkangORCID iD for Yin, Xiangkang orcid.org/0000-0002-7031-414X
Zhao, Jing
Journal name Journal of Financial and Quantitative Analysis
Total pages 33
Publisher Cambridge University Press (CUP)
Place of publication Cambridge, Eng.
Publication date 2020-01-01
ISSN 0022-1090
1756-6916
Summary Institutional demand for a stock before its earnings announcement is negatively related to subsequent returns. The relation is not attributable to the price pressure of institutional demand and is stronger for stocks with higher information asymmetry and/or greater valuation difficulty. These findings support the notion that overconfident institutions misprice stocks. Following announcements, institutions’ behavior exhibits the outcome-dependent feature of self-attribution bias. Whether they become more overconfident and delay their mispricing correction depends on whether earnings news confirms their preannouncement trades. This behavioral bias also offers a new explanation for the well-known post-earnings-announcement drift.
Language eng
DOI 10.1017/S002210902000037X
Indigenous content off
Field of Research 1501 Accounting, Auditing and Accountability
1502 Banking, Finance and Investment
HERDC Research category C1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2020, The Authors
Persistent URL http://hdl.handle.net/10536/DRO/DU:30140752

Document type: Journal Article
Collections: Faculty of Business and Law
Department of Finance
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