Abstract
This paper studies the relation between analyst optimism and CEO optimism. The CEO optimism indicator is derived from unexercised option moneyness. Bias, a common measure of analyst optimism, is partly driven by information bias. To identify the correlation between CEO optimism and analyst optimism, I use a control function to control for information bias. When acting on information, analysts expect lower earnings from optimistic CEOs; the average partial effect of information bias (or expected earnings) is -33%. However there is a positive correlation between analyst optimism and CEO optimism; the average partial effect of optimism is 29%. These results remain robust when controlling for year effects and firm fixed effects. The evidence suggests that correlated optimism is driven by behavioral CEO optimism and strategic analyst optimism; strategically optimistic analysts cover behaviorally biased CEOs in an effort to influence investors.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
