Comments on: The behavioral economics of earnings estimates http://blogs.reuters.com/felix-salmon/2010/04/05/the-behavioral-economics-of-earnings-estimates/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: Storyburn_com http://blogs.reuters.com/felix-salmon/2010/04/05/the-behavioral-economics-of-earnings-estimates/comment-page-1/#comment-13234 Wed, 07 Apr 2010 11:01:26 +0000 http://blogs.reuters.com/felix-salmon/?p=3224#comment-13234 Large cap earnings are going to rock solid next and will move the stock market to new highs

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By: dsquared http://blogs.reuters.com/felix-salmon/2010/04/05/the-behavioral-economics-of-earnings-estimates/comment-page-1/#comment-13154 Tue, 06 Apr 2010 07:14:39 +0000 http://blogs.reuters.com/felix-salmon/?p=3224#comment-13154 1. This isn’t really behavioural economics though is it? It’s a perfectly rational response to the incentives as set up – it’s game theory.

2. Your “lesson” doesn’t follow at all from this description – consensus earnings on this model would be a smoothed version of the “true” average of analysts’ views, but that could just mean it was less volatile and in any case certainly wouldn’t mean it was uninformative.

3. There is, in fact, no sense in being too aggressive. If you put any weight on the views of other analysts covering the same stock (which would be the general case unless you believed them to be totally uninformative), you would always shade your “best guess” back in the direction of consensus – Bayes’ Rule even tells you how much to shade it.

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