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The Influence of Analyst and Management Forecasts on Investor Decision Making: An Experimental Approach

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  • Millicent Chang
  • Juliana Ng

    (UWA Business School, The University of Western Australia, 35 Sterling Highway, Crawley WA 6009.)

  • Karen Yu

Abstract

Analyst and management forecasts signal a firm's future prospects, and research suggests that investors are conscious of the differing incentives to release news. We examine investor reaction to the information contained in these forecasts by considering whether decisions about their shareholdings are influenced by expectations about the motives of analysts and management. Using an experiment that manipulated the type of news released and investors' stock position, we found that unfavourable forecasts had a greater effect than favourable forecasts. Investors also place more emphasis on the news released by analysts, suggesting that information from an independent source appears to be more persuasive.

Suggested Citation

  • Millicent Chang & Juliana Ng & Karen Yu, 2008. "The Influence of Analyst and Management Forecasts on Investor Decision Making: An Experimental Approach," Australian Journal of Management, Australian School of Business, vol. 33(1), pages 47-67, June.
    • Handle: RePEc:sae:ausman:v:33:y:2008:i:1:p:47-67
    DOI: 10.1177/031289620803300104
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    Cited by:

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    2. Karen Benson & Peter M Clarkson & Tom Smith & Irene Tutticci, 2015. "A review of accounting research in the Asia Pacific region," Australian Journal of Management, Australian School of Business, vol. 40(1), pages 36-88, February.
    3. Jaimin Goh & Jaehong Lee & Wonchang Hur & Yunchang Ju, 2019. "Do Analysts Fully Reflect Information in Patents about Future Earnings?," Sustainability, MDPI, vol. 11(10), pages 1-17, May.
    4. Jeremy Burke & Angela A. Hung & Jack Clift & Steven Garber & Joanne K. Yoong, 2015. "Impacts of Conflicts of Interest in the Financial Services Industry," Working Papers WR-1076, RAND Corporation.

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