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

Document Type : Research Paper


1 Ph.D Candidate, Department of Accounting, Faculty of Economic and Social Sciences, Shahid Chamran University, Ahvaz, Iran

2 Prof., Department of Accounting, Faculty of Management and Accounting, Shahid Beheshti University, Tehran, Iran

3 Assistant Prof., Department of Accounting, Faculty of Economic and Social Sciences, Shahid Chamran University, Ahvaz, Iran


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.


Badri, A. (2015). Behavioral financial and wealth management. Tehran,Kayhan Press.
(in Persian)
Bakhsami, S. (2011). Investigating the relationship between earnings forecast error and the number of revisions in forecasting with ordinary stock returns. Dissertation of Masters, Qom, Qom University. (in Persian)
Barberis, N., Thaler, R., Shleifer, A. & Vishny, R. (1998). A model of investor sentiment. Journal of Financial Economics49 (3), 307-343.
Barinov, A. (2015). Profitability Anomaly and Aggregate Volatility Risk. Available at SSRN:
Basu, S. (1977). Investment Performance of common stocks in relation to their Price-earnings ratios: A test of the efficient market hypothesis. The Journal of Finance, 32(3), 663-682.
Bouchaud, J., Kruger, P., Landier, A. & Thesmar, D. (2017). Sticky Expectations and the Profitability Anomaly. Journal of Finance, ForthcomingHEC Paris Research Paper No. FIN-2016-1136Swiss Finance Institute Research Paper No. 16-60.
Bouchaud, J.P., Krueger, P., Landier, Thesmar, D. (2017). Sticky Expectations and the Profitability Anomaly. Available in: file:///C:/Users/q/Downloads/StickyExpectations AndTheProfitabilit _preview.pdf.
Chan, K., Hameed, A. & Kang, W. (2013). Stock price synchronicity and liquidity. Journal of Financial Markets16(3), 414-438.
Coibion, O. & Gorodnichenko, Y. (2012). What can survey forecasts tell us about information rigidities? Journal of Political Economy, 120, 116-159.
Coibion, O. & Gorodnichenko, Y. (2015). Information Rigidity and the Expectations Formation Process: A Simple Framework and New Facts, American Economic Review, 105(8), 2644-2678.
Durnev, A., Morck, B. & Yeunge, P. Z. (2003). Does Greater Firm-Specific Return Variation Mean More or Less Informed Stock Pricing? Journal of Accounting Research, 41(5), 797-836.
Ebrahimi Kordlar, A. & Ghalandari, M. (2016). The effect of Auditor expertise on income quality and synchronous stock price. Journal of Accounting and Auditing Reviews, 23(2), 137-154. (in Persian)
Engelberg, J., Mclean, Pontiff, J., (2016). Anomalies and News, Working Paper, University of California San DiegoBoston College, and University of Alberta.
Farooq, O. & Hamouda, M. (2016). Stock price synchronicity and information disclosure: Evidence from an emerging market. Finance Research Letters, 18, 250-254.
Feng, X., Hu, N., Johansson, A. C. (2016). Ownership, analyst coverage, and stock synchronicity in China. International Review of Financial Analysis, 45, 79-96.
Francis, J., Lafond, R., Olsson, P. & Schipper, K. (2004). Cost Of Equity and Earnings Attributes. The Accounting Review, 79(4), 967-1010.
Gao, H., Li, J., Guo, W., Mei, D. (2018). The synchronicity between the stock and the stock index via information in market. Physica A: Statistical Mechanics and its Applications, 492, 1382-1388.
Gennaioli, N. &Yueran, M. & Shleifer, A. (2015). Expectations and Investment.NBER Macroeconomics Annual. Available in:, M. & Eskandarli, T. (2013). Investigating the behavior of corporate executives in predicting annual profit. Journal of Empirical Studies in Financial Accounting, 10(40), 53-75. (in Persian)
Hajiha, Z. & Chenari Boket, H. (2015). The relationship between accuracy of predictability of profit management and the rotation of top managers. Journal of Investment Knowledge, 6(20), 147-169. (in Persian)
Hong, H., & Stein, J.C. (1999). A Unified Theory of Underreaction, Momentum Trading, and Overreaction in Asset Markets, The Journal of Finance, 54 (6), 2143-2184.
Hou, K., Xue, C. & Zhang, L. (2015). Digesting anomalies: an investment approach. Review of Financial Studies, 28, 650-705.
Jean-Philippe, B. & Philipp, K. & Augustin, L. & David, T. (2017). Sticky Expectations and the Profitability Anomaly.
Johnston, J. A. (2009). Accruals quality and price synchronicity. Degree of Doctor of Philosophy. University of Louisiana state & SSRN.
Kamyabi, Y. & Parhizgar, B. (2016). Investigating the relationship between institutional investors and price synchronization in listed companies in Tehran Stock Exchange. Journal of Investment Knowledge, 6(23), 71-84. (in Persian)
Lee, D. W. & Liu, M. H. (2007). Does More Information in Stock Price Lead to Greater or Smaller Idiosyncratic Return Volatility? Working Paper. Mankiw, G. & Ricardo, R. (2002). Sticky Information versus Sticky Prices: A Proposal to Replace the New Keynesian Philips Curve. Quarterly Journal of Economics, 117 (4), 1295-1328.
Mankiw, G. & Reis, R. (2006). Pervasive Stickiness. American Economic Review, 96 (2), 164‐169.
Mashayekh, B. & Azimi, A. (2016). Influence of Manager's Abilities on the Relation between Real Earning Management and Future Firm Performance. Journal of Accounting And Auditing Reviews, 23(2), 253-267. (in Persian)
Mashayekh, Sh. & Shahrokhi, S.S. (2007). Investigating the accuracy of prediction of earnings by managers and the factors affecting it. Journal of Accounting And Auditing Reviews, 14(50), 65-82. (in Persian)
McLean, R. D., Pontiff, J. (2016). Does academic research destroy stockReturn Predictability? Journal of Finance, ForthcomingAvailable in:
Nazari, M. & Farzanegan, E. (2011). Investigating Periodic Anomalies in Stock Returns of Tehran Stock Exchange (Nonparametric Bootstrapping Resampling Methods). Journal of Financial Research, 13(31), 147-167.(in Persian)
Novy-Marx, R. & Velikov, M. (2014). A Taxonomy of Anomalies and their Trading Costs. NBER Working Papers.
Osoolian, M., Sadeghi Sharif, S. J., & Khalili, M. A. (2018). Accruals, Cash Flow, and Operating Profitability in the Cross Section of Stock Returns; Evidence from Tehran Stock Exchange. Journal of Accounting and Auditing Reviews, 24(4), 463-482. (in Persian)
Parsaian, A. (2006). Accounting theory. Tehran, Termeh press. (in Persian)
Penman, S. & Zhang, X. (2002). Accounting conservatism, the Quality of Earnings and Stock Returns. The Accounting Review, 77(2), 237-264.
Penman, S.H., Penman, S.H., & Zhu, J. (2014) Accounting Anomalies, Risk, and ReturnThe Accounting Review, 89(5), 1835-1866.
Piotroski, J.D. & Roulstone, B.T. (2004). The influence of analysts, institutional investors, and insiders on the incorporation of market, industry, and firm-specific information into stock prices. Accounting Review, 79(4), 1119–1151.
Rezazadeh, J. & Ashtab, A. (2010). Relationship Accuracy of Prediction Earnings and Stock Returns of New Companies in Tehran Stock Exchange. Journal of Economics Research, 9(37), 55-76. (in Persian)
Schwert, G.W. (2003). Anomalies and market efficiency. Handbook of the Economics of Finance, 1, 939-974.
Zekhnini, M. (2015). Sticky Wages, Profitability, and Momentum.
Zhu, J. (2014). Accounting Anomalies, Risk and Return. The Accounting Review, 89(5).