Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/100768 
Year of Publication: 
2000
Series/Report no.: 
Working Paper No. 2000-5
Publisher: 
Federal Reserve Bank of Atlanta, Atlanta, GA
Abstract: 
In this paper we use a simultaneous equations model to examine the relationship between analysts' forecasting decisions and institutions' investment decisions. Neglecting their interaction results in model misspecification. We find that analysts' optimism concerning a firm's earnings responds positively to changes in the number of institutions holding the firm's stock. At the same time, institutional demand responds positively to increases in analysts' optimism. We also investigate several firm characteristics as determinants of analysts' and institutions' decisions. We conclude that agency-driven behavioral considerations are significant.
Subjects: 
Financial institutions
Forecasting
Financial markets
Document Type: 
Working Paper

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