-
Views
-
Cite
Cite
Anthony M Kwasnica, Raisa Velthuis, Jared Williams, Did You See What I Saw? Interpreting Others’ Forecasts When Their Information Is Unknown, Review of Finance, Volume 23, Issue 2, March 2019, Pages 325–361, https://doi.org/10.1093/rof/rfx052
- Share Icon Share
Abstract
We conduct a series of forecasting experiments to examine how people update their beliefs upon observing others’ forecasts. Subjects exhibit “cursedness,” that is, a propensity to underestimate the link between others’ forecasts and others’ information, which causes subjects to underreact. The behavior of sophisticated subjects is not affected by the framing of information, but unsophisticated subjects switch from underreaction to overreaction when they are only provided qualitative (rather than quantitative) forecast information. Our results have important implications for the way that financial analysts aggregate information and the way that financial institutions present forecasts to their clients.