In-group bias in financial markets

Jannati, Sima ; Kumar, Alok ; Niessen-Ruenzi, Alexandra ; Wolfers, Justin

Document Type: Working paper
Year of publication: 2018
The title of a journal, publication series: SSRN Working Paper Series
Place of publication: Rochester, NY
Edition: Revised
Publication language: English
Institution: Business School > ABWL u. Corporate Governance (Niessen-Ruenzi 2012-)
Subject: 330 Economics
Abstract: This paper investigates in-group bias in financial markets. Specifically, we argue that equity analysts may have less favorable opinions about firms that are not headed by CEOs of their own “group”. We define groups based on gender, ethnicity and political attitudes. Examining analysts’ earnings forecasts, we find that male analysts have lower assessments of firms headed by female CEOs than of firms headed by male CEOs. Results are very similar if in-groups are defined based on ethnicity or political attitudes: Earnings forecasts of domestic analysts are lower for firms headed by foreign CEOs and earnings forecasts of Republican analysts are lower for firms headed by Democrat CEOs. As a result, earnings surprises of firms headed by female, foreign, or Democrat CEOs are systematically upward biased. Overall, our results provide robust evidence for in-group bias in financial markets.

Dieser Eintrag ist Teil der Universitätsbibliographie.

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