The impact of the anchoring and adjustment bias on analysts’ forecast in Vietnam stock market. In this research, we consider a well-known behavioral bias of financial market participants, the anchoring and adjustment bias described by Tversky and Kahneman (1974). Empirical findings have shown that this heuristic has significant economic consequences for the efficiency of the financial market of Vietnam. | Journal of Economics and Development Vol. 15, , December 2013, pp. 59 - 76 ISSN 1859 0020 The Impact of The Anchoring and Adjustment Bias on Analysts’ Forecast in Vietnam Stock Market Nguyen Duc Hien National Economics University, Vietnam Email: hiennd@ Trinh Quang Hung National Economics University, Vietnam Bui Huong Giang National Economics University, Vietnam Abstract In this research, we consider a well-known behavioral bias of financial market participants, the anchoring and adjustment bias described by Tversky and Kahneman (1974). Empirical findings have shown that this heuristic has significant economic consequences for the efficiency of the financial market of Vietnam. Specifically, we investigate the existence of anchoring and adjustment bias when stock analysts forecast future earnings of a firm by examining 661 analysts’ reports forecasting prices in Vietnam from 2009 - 2012. In addition, we find that anchoring and adjustment bias appears to have considerable influence over both male and female analysts. With the multi-variable regression model, we find out the effects of anchoring and adjustment bias on different group of analysts as well as the time horizon. Keywords: Anchoring and adjustment bias, analysts’ earnings forecasts, forecasting error, behavioral finance. Journal of Economics and Development 59 Vol. 15, , December 2013 1. Introduction Kahneman (1974). Along with two more wellknown heuristics (representativeness and availability), people are assumed to use this heuristic in the process of making decisions under conditions of uncertainty. Tversky and Kahneman define anchoring as a phenomenon when people make estimates by starting from an initial value or reference point, or arbitrary price levels. The initial value or starting point may be established from the formulation of the problem, or it may be the result of a partial computation. However, the adjustments are typically insufficient. That is, different .
