The Effect of Managers Expectations Stickiness on Relationship between Sustainability of Profitability Anomalies and Stock Price Synchronicity

Abstract

Objective: Market anomalieschange with economic conditions, stock markets, selected samples, time periods and differences between industries. Revision of past forecasts leads to forecast error. The revisions result from new information. On the other hand, some managers slowly revise their forecasts in responding to new information. Therefore, the purpose of this research is to investigate the relationship between the sustainability of profit signals and stock price synchronization. Also effect of stickiness of manager expectations on this relationship has been investigated. Methods: The research hypotheses were tested and analyzed by using data from 178 companies for the period of 10 years from 1386 to 1395, and multi-variable regression and panel data methods. Results: Research's findings showed that there was a negative and significant relationship between the sustainability of return on equity, return on asset and cash flows, and the synchronization of stock prices, also a positive significant relationship between the sustainability of gross profit and the price synchronization. Also, the moderator variable of stickiness of manager's expectations strengthens the relationship between sustainability of return on equity, return on asset, cash flows, gross profit, and the stock price synchronization. Conclusion: According to the results, some of the sustainability of profitability measuresis due to the lack of rapid reaction of managers to new information. By increasing stickiness of manager's expectations, the information content of the profitability measuresreduces and leads to investors incorrect decisions.

Keywords

• Profitability anomalies
• Stickiness of manager's expectations
• Price synchronization