Does short selling reduce analysts’ optimism bias in earnings forecasts?
| Autor: | Deshuai Hou, Qingbin Meng, Kam C. Chan |
|---|---|
| Rok vydání: | 2021 |
| Předmět: |
040101 forestry
050208 finance Information set Earnings 05 social sciences Optimism bias Media coverage 04 agricultural and veterinary sciences Fixed effects model Argument Time windows 0502 economics and business Econometrics Economics 0401 agriculture forestry and fisheries Business Management and Accounting (miscellaneous) Finance Market conditions |
| Zdroj: | Research in International Business and Finance. 56:101356 |
| ISSN: | 0275-5319 |
| Popis: | We examine the relationship between short selling and analyst optimism bias of earnings forecasts of stocks in China. We propose two possible hypotheses: short selling enhances analysts’ information set to lower optimism bias and analysts drum up optimistic earnings forecasts to counter short selling. Our results suggest that short selling and earnings optimism bias are negatively correlated. The findings are robust to a two-stage least square method, a difference in-differences fixed effect model, an alternative measure of optimism bias, incorporated different time windows to calculate short selling, considered bull and bear market conditions, accounting for media coverage, and using abnormal short selling. By leveraging rich data, we conduct additional analyses using stocks with different forecasting horizons and earnings forecasts that were made after the accounting year but prior to the earnings announcement to further support expanding the information set argument. Lastly, we document that short selling information improves the accuracy of earnings forecasts. |
| Databáze: | OpenAIRE |
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