The power of priors: How confirmation bias impacts market prices
Main Article Content
Abstract
Article Details
References
J Abarbanell and V Bernard ‘Test of Analysts’ Overreaction/Under-reaction to Earnings Information as an Explanation for Anomalous Stock Price Behavior’ Journal of Finance (1992) 47 1181-1207.
C A Anderson, M R Lepper and L Ross ‘The perseverance of social theories: The role of explanation in the persistence of discredited information’ Journal of Personality and Social Psychology (1980) 39 1037-1049.
U Anderson and W Wright ‘Expertise and the explanation effect’ Organizational Behavior and Human Decision Processes (1988) 42 250-269.
N Barberis and R Thaler ‘A survey of behavioral finance’ in G M Constantinides, M Harris and R Stulz (eds) Handbook of the Economics of Finance (Elsevier Science, 2001).
J E Berg, F D Nelson and T Rietz ‘Prediction Market Accuracy in the Long Run’ International Journal of Forecasting (2008) 24(2) 283-298.
G Bodenhausen ‘Stereotypic biases in social decision making and memory: testing process models of stereotype use’ Journal of Personality and Social Psychology (1988) 55 726-737.
C F Camerer ‘Do biases in probability judgments matter in markets? Experimental evidence’ American Economic Review (1987) 77 981-997.
C F Camerer ‘The Rationality of Prices and Volume in Experimental Markets’ Organizational Behavior & Human Decision Processes (1992) 51(2) 237-272.
K Daniel D Hirshleifer and A Subrahmanyam ‘Investor Psychology and Security Market Under- and Overreactions’ Journal of Finance (1998) 53(6) 1839-1886.
P H Ditto, G D Munro, A Apanovitch, J A Scepansky and L K Lockhart ‘Motivated sensitivity to preference-inconsistent information’ Journal of Personality and Social Psychology (1998) 75(1), 53-69.
M J Eames, S M Glover and J J Kennedy, J.J.’Stock Recommendations as a Source of Bias in Earnings Forecasts’ Behavioral Research in Accounting (2006) 18 37-51.
J C Easterwood and S R Nutt ‘Inefficiency in Analysts’ Earnings Forecasts: Systematic Misreaction or Systematic Optimism’ Journal of Finance (1999) 54(5) 1777-1797.
A Elberse ‘The Power of Stars: Do Star Actors Drive the Success of Movies?’ Journal of Marketing (2007) 71 102–120.
A Elberse and B Anand ‘The effectiveness of pre-release advertising for motion pictures: An empirical investigation using a simulated market’ Information Economics & Policy (2007) 19(3/4) 319-343.
J A Elliott, D R Philbrick and C I Wiedman ‘Evidence from Archival Data on the Relation Between Security Analysts’ Forecast Errors and Prior Forecast Revisions’ Contemporary Accounting Research (1995) 11(2) 919-938.
J St B T Evans Bias in human reasoning: causes and consequences (Hillsdale, NJ, Erlbaum, 1989).
E F Fama ‘Market efficiency, long-term returns, and behavioral finance’ Journal of Financial Economics (1998) 49 283-306.
R Forsythe, F Nelson, G R Neumann and J Wright ‘Anatomy of an Experimental Political Stock Market’ American Economic Review (1992) 82 1142-1161.
R Forsythe, T Rietz and T W Ross ‘Wishes, Expectations and Actions: Price Formation in Election Stock Markets’ Journal of Economic Behavior and Organization (1999) 39 83-110.
A R Ganguly, J H Kagel and D V Moser ‘The effects of biases in probability judgments on market prices’ Accounting, Organizations, and Society (1994) 19(8) 675-700.
S J Grossman ‘An introduction to the theory of rational expectations under asymmetric information’ Review of Economic Studies (1981) 48 541–559.
J Hales ‘Directional Preferences, Information Processing and Investors’ Forecasts of Earnings’ Journal of Accounting Research (2007) 45(3) 607-628.
J S Hammersley, K Kadous and A M Magro ‘Cognitive and Strategic Components of the Explanation Effect’ Organizational Behavior and Human Decision Processes (1997) 70(2) 149-158.
J S Hammersley, J.S ‘A Review and Model of Auditor Judgments in Fraud-Related Planning Tasks’ Auditing: A Journal of Practice and Theory (2011) 30(4) 101-128.
J Han and H Tan ‘Investors’ reactions to Management Earnings Guidance: The Joint Effect of Investment Position, News Valence and Guidance Form’ Journal of Accounting Research (2010) 48(1) 81-103.
W Hart, D Albarracin, A Eagly, I Brechan, M Lindberg and L Merrill ‘Feeling validated versus being correct: a meta-analysis of selective exposure to information’ Psychological Bulletin (2009) 135 555-588.
J S Hughes, J Liu and W Su ‘On the Relation between Predictable Market Returns and Predictable Analyst Forecast Errors’ Review of Accounting Studies (2008) 13 266-291.
R Kasznik and M F McNichols ‘Does Meeting Earnings Expectations Matter? Evidence from Analyst Forecast Revisions and Share Prices’ Journal of Accounting Research (2002) 40(3) 727-759.
B D Kluger and S B Wyatt ‘Are Judgment Errors Reflected in Market Prices and Allocations? Experimental Evidence Based on the Monty Hall Problem’ Journal of Finance (2004) 59(3) 969-997.
D J Koehler ‘Explanation, Imagination, and Confidence in Judgment’ Psychological Bulletin (1991) 110 499-519.
R E Krider and C B Weinberg ‘Competitive dynamics and the introduction of new products: The motion picture timing game’ Journal of Marketing Research (1998) 35 1–15.
J Liu ‘Market and analysts reactions to earnings news: an efficiency comparison’ (2003) UCLA Working Paper.
C G Lord, M R Lepper and L Ross ‘Biased assimilation and attitude polarization: The effects of prior theories on subsequently considered evidence’ Journal of Personality and Social Psychology (1979) 37 2098-2110.
R E Lucas ‘Expectations and the neutrality of money’ Journal of Economic Theory (1972) 4 103–124.
R S Nickerson ‘Confirmation bias: a ubiquitous phenomenon in many guises’ Review of General Psychology (1998) 2 175-220.
T Odean ‘Volume, volatility, price, and profits when all traders are above average’ Journal of Finance (1998) 53 1887-1934.
D M Pennock, F A Nielsen and C L Giles ‘Extracting Collective Probabilistic Forecasts from Web Game’ in Proceedings of the Seventh ACM SIGKDD International Conference on Knowledge Discovery and Data Mining (New York, 2001) pp 174-183.
C Plott ‘Markets as Information Gathering Tools’ Southern Economic Journal (2000) 67 1-15.
S Pouget, J Sauvagnat and S Villeneuve ‘A Mind is a Terrible Thing to Change: Confirmatory Bias in Financial Markets’ (2014) Toulouse School of Economics Working Paper.
M Rabin and J Schrag ‘First impressions matter: a model of confirmatory bias’ Quarterly Journal of Economics (1999) 114 37-82.
L D Ross, M R Lepper, F Strack and J Steinmetz ‘Social explanation and social expectation: Effects of real and hypothetical explanations on subjective likelihood’ Journal of Personality and Social Psychology (1977) 35(11) 817-829.
A Rubinstein ‘A Theorist’s View of Experiments’ European Economic Review (2001) 45 615-628.
D Scharfstein and J Stein ‘Herd behavior and investment’ American Economic Review (1990) 80 465-479.
H Shefrin Behavioral Corporate Finance: Decisions that Create Value (New York, McGraw-Hill Irwin, 2007)
S J Sherman ‘On the Self-Erasing Nature of Errors of Prediction’ Journal of Personality and Social Psychology (1980) 39 211-21.
S J Sherman, R B Skov, E E Hervitz and C B Stock ’The effects of explaining hypothetical future events: From possibility to probability to actuality and beyond’ Journal of Experimental Social Psychology (1981) 17 142-158.
P E Tetlock ‘Accountability: A social check on the Fundamental Attribution Error’ Social Psychology Quarterly (1985) 48 227-236.
J Thayer ‘Determinants of Investors’ Information Acquisition: Credibility and Confirmation’ The Accounting Review (2011) 86(1) 1-22.
B Trueman ‘Analyst forecasts and herding behavior’ Review of Financial Studies (1994) 7 97-124.
B Tuttle, M Coller and F G Burton ‘An examination of market efficiency: Information order effects in a laboratory market’ Accounting, Organizations, and Society (1997) 22(1) 89-103.
F Teschner, F Wagenschwanz and C Weinhardt ‘Analysis of the Disposition Effect: Asymmetry and Prediction Accuracy’ Journal of Prediction Markets (2012) 7(1), 27-42