Topic: Sticky expectations and cross-firm return predictability

Speaker: CHEN Zilin, Southwest University of Finance and Economics

Time: April 28, 2025, 10:30

Venue: EMS 161

Abstract:

Previous empirical studies document a striking cross-firm return predictability among economically linked firms. This study reveals that the cross-firm return predictability is attributable to analysts' sticky expectations. Notably, the return predictability is more pronounced for focal firms covered by analysts with stickier expectations, particularly during earnings announcement days. Furthermore, this effect remains robust against alternative explanations and is evident across different sub-samples, alternative measures of expectation stickiness, various economic linkages, and most of other countries. Our findings highlight a novel insight that analysts' sticky expectations serve as an important force in driving investors' underreaction to the valuable information from economically linked firms.

Guest Bio:

Chen Zilin is an Associate Professor at the School of Finance, Southwestern University of Finance and Economics. His research focuses on asset pricing and international finance. He holds a Ph.D. from Singapore Management University, and his work has been published in leading international journals such as the Journal of Financial Economics, Journal of Banking and Finance, and Journal of Economic Dynamics and Control.