7. Sticky forecast errors. Run regressions of the earnings surprise in quarter t on the earnings...

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7. "Sticky" forecast errors. Run regressions of the earnings surprise in quarter t on the earnings surprise in quarter t-1, t-2, t-3, and t- 4: Surt-Bo+ B Sure1,k+ k Surek Bo+B Sure-24 + k Surek Bo+B1 Sure-3,4+ Surek Bo+ B Sur,k+ Eck (1) (2) (3) (4) You do not have do add any particular control variables, but you should think about what kind of fixed effects could be appropriate (and add them to the regression). How do you interpret the estimate of B1 in these regressions economically? How much of a surprise is the earnings surprise really? Does B1 say something about how rationally analysts update their estimates for the next quarter when there was an earnings surprise in the current quarter? Advanced questions (if you have extra time): What do the regression coefficients in each of the three regression models in Q5 and Q6 measure? Which is the coefficient of (most) interest in each regression? State the economic magnitude of the effects that you estimate in each regression. How should standard errors be computed in these regressions? How do your results compare to those of Della Vigna and Pollet? Do you replicate their findings? You can also try to run the analysis on two different subsamples: the earlier part of the sample that includes data that DellaVigna and Pollet used (Jan 2000 to June 2006) and the later "post-publication"sample (July 2006 to Dec 2016). 7. "Sticky" forecast errors. Run regressions of the earnings surprise in quarter t on the earnings surprise in quarter t-1, t-2, t-3, and t- 4: Surt-Bo+ B Sure1,k+ k Surek Bo+B Sure-24 + k Surek Bo+B1 Sure-3,4+ Surek Bo+ B Sur,k+ Eck (1) (2) (3) (4) You do not have do add any particular control variables, but you should think about what kind of fixed effects could be appropriate (and add them to the regression). How do you interpret the estimate of B1 in these regressions economically? How much of a surprise is the earnings surprise really? Does B1 say something about how rationally analysts update their estimates for the next quarter when there was an earnings surprise in the current quarter? Advanced questions (if you have extra time): What do the regression coefficients in each of the three regression models in Q5 and Q6 measure? Which is the coefficient of (most) interest in each regression? State the economic magnitude of the effects that you estimate in each regression. How should standard errors be computed in these regressions? How do your results compare to those of Della Vigna and Pollet? Do you replicate their findings? You can also try to run the analysis on two different subsamples: the earlier part of the sample that includes data that DellaVigna and Pollet used (Jan 2000 to June 2006) and the later "post-publication"sample (July 2006 to Dec 2016).