Horizon‐Dependent Underreaction in Financial Analysts' Earnings Forecasts*

This paper provides empirical evidence that underreaction in financial analysts' earnings forecasts increases with the forecast horizon, and offers a rational economic explanation for this result. The empirical portion of the paper evaluates analysts' responses to earnings‐surprise and other earnings‐related information. Our empirical evidence suggests that analysts' earnings forecasts underreact to both types of information, and the underreaction increases with the forecast horizon. The paper also develops a theoretical model that explains this horizon‐dependent analyst underreaction as a rational response to an asymmetric loss function. The model assumes that, for a given level of inaccuracy, analysts' reputations suffer more (less) when subsequent information causes a revision in investor expectations in the opposite (same) direction as the analyst's prior earnings‐forecast revision. Given this asymmetric loss function, underreaction increases with the risk of subsequent disconfirming information and with the disproportionate cost associated with revision reversal. Assuming that market frictions prevent prices from immediately unraveling these analyst underreac‐tion tactics, investors buying (selling) stock on the basis of analysts' positive (negative) earnings‐forecast revisions also benefit from analyst underreaction. Therefore, the asymmetric cost of forecast inaccuracy could arise from rational investor incentives consistent with a preference for analyst underreaction. Our incentives‐based explanation for underreaction provides an alternative to psychology‐based explanations and suggests avenues for further research.     

Research in accounting for income taxes

This paper comprehensively reviews the Accounting for Income Taxes (AFIT) literature. We begin by identifying four distinctive aspects of AFIT and briefly covering the rules surrounding AFIT. We then review the existing studies in detail and offer suggestions for future research. We emphasize the research questions that have been addressed (most of which relate to whether the tax accounts are used to manage earnings and whether the tax accounts are priced by equity market participants). We also highlight areas that have not received much research attention and that warrant future analysis.     

Age matters: How developmental stages of adulthood affect customer reaction to complaint handling efforts

This research examines how age moderates the impact of justice perception (i.e., distributive, procedural, and interactional justice) on post-complaint satisfaction. By tracking the three justice dimensions' effect sizes across different ages, we identify four developmental stages of adulthood, which are separated by five-year transition periods. The stages are young (18–27 years of age), early (33–43), middle (49–57), and late adulthood (≥63). The moderation results show that the impact of distributive justice on satisfaction peaks in middle adulthood and the effect of procedural justice in early adulthood. Finally, the effect of interactional justice dips in early adulthood. Managerial and theoretical implications are discussed.     

Konjunkturschlaglicht: Wechselkurspolitik in China

HWWA-KONJUNKTURFORUM

Konjunkturschlaglicht: Wechselkurspolitik in China     

The influence of TV viewing on consumers' body images and related consumption behavior

Based on cultivation theory, self-concept theories, and gender research, this study investigates the influence of TV viewing on female and male consumers' perceived body images and related consumption behavior. The results show that TV viewing biases social perceptions of body images; however, TV viewing does not impact men's consumption behavior. For women, in contrast, TV viewing increases the real–ideal self discrepancy, which, in turn, leads to consumption behavior in order to achieve ideal bodies. For both groups, TV viewing increases body dissatisfaction; also, general beliefs about body images influence related behavior. The results provide some interesting contributions to theory and practice.     

Neue Schuldenregeln: Sicherheitsabstand für eine stetige Finanzpolitik

Mit der jüngsten F?deralismusreform soll unter anderem die Verbindlichkeit der Verschuldungsgrenzen erh?ht werden. Hierdurch steigen die Anforderungen an die Haushalts- und Finanzplanung, da unerwartete Entwicklungen zukünftig verst?rkt im Rahmen der regul?ren Grenzen abgefedert werden müssen. Begrenzte Abweichungen im Vollzug k?nnen zwar über das Kontrollkonto aufgefangen werden. Wie kann aber vermieden werden, dass überraschende Entwicklungen erratische Politikanpassungen im Rahmen der Haushaltsplanungen erforderlich machen und so eine stetige Finanzpolitik erschwert und die Wirkung der automatischen Stabilisatoren eingeschr?nkt wird?     

Noah's Ark is full of common species attractive to humans: The case of boid snakes in zoos

As the fate of endangered species may largely depend on human decisions, we analyzed the effect of species attractiveness to humans on conservation efforts devoted to captive breeding. Our respondents were asked to rank photographs of 56 species of boas and pythons according to perceived attractiveness. Surprisingly, attractiveness, body size and, marginally, also taxonomic uniqueness of the species were the only significant predictors of the size of zoo population. On the other hand, variables putatively associated with species rarity (inclusion in the Red List or protection by international law, geographic range size, and commercial price) had no effect. The range size was, however, positively correlated with attractiveness. As the perceived attractiveness affects at least some components of the conservation effort, it should not be further neglected but should be routinely included into conservation reasoning.     

On Income Velocity of Money,Precautionary Money Demand and Growth

A stochastic growth model with money introduced via a cash-in-advance constraint is used to analyze the behavior of the income velocity of real monetary balances and money demand. Agents can purchase consumption goods only using government issued money. The cash-in-advance constraint may become nonbinding because of the uncertainty about the realization of the state of the economy. We find that the precautionary money demand may introduce significant changes into the volatility of the income velocity if it happens almost always. Its presence can also alter the relationship between the average growth rate of money supply and the average growth rate of the economy.