Hubris in the Stock Market?: A Study of Financial Experts’ Accuracy and Calibration

Sammanfattning: Financial experts issue buy and sell recommendations on stocks according to what they deem to be their fair value. The aim of this thesis is to examine the accuracy and calibration of financial experts. This is done by gathering and analysing data on the performance of financial experts and their level of confidence. We find evidence of overconfidence and (weak) evidence for the financial experts’ performance being better than chance. We also find evidence for our hypothesis that financial experts issue relatively more buy than sell recommendations. Our findings also suggest that constructing a successful investment strategy based on these financial experts’ recommendations can be difficult as their level of confidence is not really important for the outcome of their forecasts.