Publication Type
Working Paper
Version
publishedVersion
Publication Date
9-2023
Abstract
We study whether abstract thinking – an essential cognitive trait established by psychological and neuroscientific studies – facilitates analysts’ information processing. Exploiting analysts’ questions during earnings calls, we construct an Abstract Thinking Index (ATI) that measures their tendency to involve abstract words, logical reasoning, broader topics, and future outlooks. We find that abstract thinking improves analysts’ forecast accuracy and recommendation informativeness. Consistent with abstract thinking featuring identifying central characteristics and comprehending intangible things, ATI has stronger effects for firms with fundamentals co-moving more with peers and less tangible information. Additional analyses suggest that ATI captures analysts’ cognitive traits rather than information access.
Keywords
Abstract thinking, equity analyst, information processing, forecast accuracy
Discipline
Finance | Finance and Financial Management
Research Areas
Finance
First Page
1
Last Page
68
Identifier
10.2139/ssrn.4296722
Publisher
SSRN
Citation
LI, Frank Weikai; WANG, Rong; YU, Yang; and YU, Gloria Yang.
Does abstract thinking facilitate information processing? Evidence from financial analysts. (2023). 1-68.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/7125
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.2139/ssrn.4296722