1. Do Analysts Overreact to Good News and Underreact to Bad News: A Hazard Model Approach
Discussant:
Yun-Yi Wang, Feng Chia University
2010 NTUICF, Taipei, Taiwan

2. Summary and Main Results
This study isolates incentives and cognitive processing biases through the timing of analysts’ recommendation revisions.
when they control for favorable preceding recommendations
analysts delay conveying bad news
which is consistent with the incentives and cognitive dissonance hypotheses.
when they control for unfavorable preceding recommendations
analysts delay conveying good news
which is only consistent with the cognitive dissonance hypothesis.

3. Strengths and Contributions
The authors use analysts’ recommendation reversion to isolates incentives and cognitive processing biases.
Empirical strategy is innovative and new.
Security analyst optimism is a well-known phenomenon.
My points will be suggestions intented to improve the paper.

4. Comment and Suggestion 1
Hazard model:
Previous literature (ex, Mokoaleli-Mokoteli et al., 2009, JBFA) shows that analysts’ recommendations are associated with
previous stock price performance, growth status of the firm (low book-to-market), firm size, corporate relationships between their investment bank employers and the firms they are following,…
Is it possible to include control variable in the hazard model?

5. Comment and Suggestion 2
The observed behavior can be explained by several biases at the same time.
Can be explained by any other rational or irrational explanations?

6. 169.72
Favorable ︿
Favorable
Unfavorable
175.33
Favorable
170.66 ﹀
Unfavorable
Unfavorable
136.66
If the analyst need to reverse their preceding recommendation, they need more time to confirm whether the news is correct and whether the reversion is necessary.