Information rigidity: Comparing average and individual forecasts of analysts of Chinese A-Share listed companies

Using data on analysts' individual forecasts from all listed companies in China's A-share market for the period 2007–2022, we document two stylized facts. First, the average forecast error can be predicted by forecast revision. Second, individual forecasts appear to over-react to own revisions and salient public signals, we show that the first fact is inconsistent with standard models of full information rational expectations. The second fact suggests that individuals may be irrational with respect to their use of information. Expectation formation theory suitable for China's capital market may need to combine information friction and irrational belief.