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Do Sell-Side Stock Analysts Exhibit Escalation of Commitment?

August 18, 2011 Comments off

Do Sell-Side Stock Analysts Exhibit Escalation of Commitment? (PDF)
Source: Journal of Economic Behavior & Organization

This paper presents evidence that when an analyst makes an out-of-consensus forecast of a company’s quarterly earnings that turns out to be incorrect, she escalates her commitment to maintaining an out-ofconsensus view on the company. Relative to an analyst who was close to the consensus, the out-of-consensus analyst adjusts her forecasts for the current fiscal year’s earnings less in the direction of the quarterly earnings surprise. On average, this type of updating behavior reduces forecasting accuracy, so it does not seem to reflect superior private information. Further empirical results suggest that analysts do not have financial incentives to stand by extreme stock calls in the face of contradictory evidence. Managerial and financial market implications are discussed.

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Happiest places have highest suicide rates says new research

April 21, 2011 Comments off

Happiest places have highest suicide rates says new research
Source: Journal of Economic Behavior & Organization, forthcoming

The happiest countries and happiest U.S. states tend to have the highest suicide rates, according to research from the UK’s University of Warwick, Hamilton College in New York and the Federal Reserve Bank of San Francisco.

The new research paper titled Dark Contrasts: The Paradox of High Rates of Suicide in Happy Places has been accepted for publication in the Journal of Economic Behavior & Organization. It uses U.S. and international data, which included first-time comparisons of a newly available random sample of 1.3 million Americans, and another on suicide decisions among an independent random sample of approximately 1 million Americans.

The research confirmed a little known and seemingly puzzling fact: many happy countries have unusually high rates of suicide. This observation has been made from time to time about individual nations, especially in the case of Denmark. This new research found that a range of nations – including: Canada, the United States, Iceland, Ireland and Switzerland, display relatively high happiness levels and yet also have high suicide rates. Nevertheless the researchers note that, because of variation in cultures and suicide-reporting conventions, such cross-country scatter plots are only suggestive. To confirm the relationship between levels of happiness and rates of suicide within a geographical area, the researchers turned to two very large data sets covering a single country, the United States.

The scientific advantage of comparing happiness and suicide rates across U.S. states is that cultural background, national institutions, language and religion are relatively constant across a single country. While still not absolutely perfect, as the States are not identical, comparing the different areas of the country gave a much more homogeneous population to examine rather than a global sample of nations.

Comparing U.S. states in this way produced the same result. States with people who are generally more satisfied with their lives tended to have higher suicide rates than those with lower average levels of life satisfaction. For example, the raw data showed that Utah is ranked first in life-satisfaction, but has the 9th highest suicide rate. Meanwhile, New York was ranked 45th in life satisfaction, yet had the lowest suicide rate in the country.

+ Dark Contrasts: The Paradox of High Rates of Suicide in Happy Places (Word)

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