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Investment class (behavioral bias) - Assignment Example
Finance & Accounting
Pages 5 (1255 words)
BEHAVIORAL BIAS Introduction As much as possible, estimators and forecasters are expected to go about their duties in a manner that would guarantee and assure accuracy. This is because the more accurate forecasts are, the more professional and competent these estimators and forecasters are presumed to be (Loughran, 2004, p…
In most of these studies, researchers have been critical in finding out whether the biases are intentional or unintentional and whether or not forecast bias take place to serve any good to forecasters and estimator. In the current paper, an existing model proposed by Knill, Minnick and Nejadmalayeri (2011, p 13) is examined with a new touch of behavioral bias to find out how behavioral bias such as overconfidence can be incorporated into the framework outlined by the researchers. Furthermore, the effects of experience and information asymmetry shall be analysed to find their impact on such forecast bias that take place. The existing model The existing model or framework proposed by Knill, Minnick and Nejadmalayeri (2011, p. 87) is one that can best be described as integrated as it makes use of a number of components and aspects of general forecasting such as public information and private assessment. The model also considers common and idiosyncratic components of earnings forecast where there is the use of previously disclosed information. ...