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- 2014-6-28
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representativeness vs anchoring
feel like i'm kind of getting conflicting messages out of the materials.
SO if representativeness holds, a stock that has a positive earnings surprise will result in investors buying the stock, which can push the stock price past its justified value (with the opposite happening for negative surprises). So essentially, overpriced "winners" will underperform and underpriced "losers" will outperform.
Meanwhile, according to anchoring, a positive (negative) earnings surprise may be followed by future positive (negative) surprises because analysts don't fully incorporate the new information into their forecasts. This would indicate that investors should buy after an earnings surprise and sell after a negative surprise.
Aren't these 2 strategies in direct conflict? which one is "right"? |
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