Do Security Analysts Speak in Two Tongues? /
Malmendier, Ulrike.
Do Security Analysts Speak in Two Tongues? / Ulrike Malmendier, Devin Shanthikumar. - Cambridge, Mass. National Bureau of Economic Research 2007. - 1 online resource: illustrations (black and white); - NBER working paper series no. w13124 . - Working Paper Series (National Bureau of Economic Research) no. w13124. .
May 2007.
Why do security analysts issue overly positive recommendations? We propose a novel approach to distinguish strategic motives (e.g., generating small-investor purchases and pleasing management) from nonstrategic motives (genuine overoptimism). We argue that nonstrategic distorters tend to issue both positive recommendations and optimistic forecasts, while strategic distorters "speak in two tongues," issuing overly positive recommendations but less optimistic forecasts. We show that the incidence of strategic distortion is large and systematically related to proxies for incentive misalignment. Our "two-tongues metric" reveals strategic distortion beyond those indicators and provides a new tool for detecting incentives to distort that are hard to identify otherwise.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.
Do Security Analysts Speak in Two Tongues? / Ulrike Malmendier, Devin Shanthikumar. - Cambridge, Mass. National Bureau of Economic Research 2007. - 1 online resource: illustrations (black and white); - NBER working paper series no. w13124 . - Working Paper Series (National Bureau of Economic Research) no. w13124. .
May 2007.
Why do security analysts issue overly positive recommendations? We propose a novel approach to distinguish strategic motives (e.g., generating small-investor purchases and pleasing management) from nonstrategic motives (genuine overoptimism). We argue that nonstrategic distorters tend to issue both positive recommendations and optimistic forecasts, while strategic distorters "speak in two tongues," issuing overly positive recommendations but less optimistic forecasts. We show that the incidence of strategic distortion is large and systematically related to proxies for incentive misalignment. Our "two-tongues metric" reveals strategic distortion beyond those indicators and provides a new tool for detecting incentives to distort that are hard to identify otherwise.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.