Abstract
In this paper, we study whether firm intangible information affects analyst behavior. We find direct evidence that when analysts make more judgment-intensive decisions, such as issuing stock recommendations, they overweight intangible information, leading to overreaction to intangible information. On the contrary, when analysts make less judgment-intensive decisions, such as earnings per share (EPS) forecasts, there is no such evidence of overreaction. More specifically, analyst recommendations are much more sensitive to intangible information, while EPS forecasts are more sensitive to tangible information. The sensitivity of long-term growth forecasts to intangible and tangible information fall in between. We also test and find that the overconfidence bias in analyst recommendations contributes to the market overreaction to intangible information. Our results appear to be consistent with the overconfidence hypothesis put forth by Daniel and Titman (2006).
Published Version
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