Number Processing Bias in Analysts' Forecasts: Emerging Markets Evidence

Student: Petrova Ksenia

Supervisor: Oleg Shibanov

Educational Programme: Joint HSE-NES Undergraduate Program in Economics (Bachelor)

Year of Graduation: 2019

In the paper we study the number processing behavioral bias that results in different processing of small and large numbers by the members of the financial community. In particular, we examine how stock target prices issued by analysts of the emerging market companies depend on nominal stock prices. In our research we confirm that analysts process small and large prices differently: after the inclusion of firm specific controls we get that analysts anticipate more extreme returns for lower-priced stocks in comparison to higher-priced stocks ceteris paribus. Our results indicate the existence of the number processing bias that is present even among the highly educated professionals who regularly work with numbers.

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