Author: Dan Bernhardt
Publisher:
ISBN:
Category :
Languages : en
Pages : 27
Book Description
In a recent paper, Bernhardt et al. (2004) developed a non-parametric test for bias in forecasts by professional financial analysts that is robust to correlated information amongst analysts and information arrival over the forecasting cycle. The tests show that analysts anti-herd: Analysts systematically issue biased contrarian forecasts that overshoot the publicly-available consensus forecast in the direction of their private information. In this campanion paper, we show that for those analysts that report later in the forecast-horizon, a reward scheme that is convex in relative performance may shed some light on this strategic behavior. The pattern and magnitude of the forecast bias in the last forecast are identical to the results in Bernhardt et al., and slightly higher in some sub-samples. An analysis of daily returns around the date of earnings announcement reveals that investors do not fully unravel the bias in late forecasts.
Analyst Compensation and Forecast Bias
Author: Dan Bernhardt
Publisher:
ISBN:
Category :
Languages : en
Pages : 27
Book Description
In a recent paper, Bernhardt et al. (2004) developed a non-parametric test for bias in forecasts by professional financial analysts that is robust to correlated information amongst analysts and information arrival over the forecasting cycle. The tests show that analysts anti-herd: Analysts systematically issue biased contrarian forecasts that overshoot the publicly-available consensus forecast in the direction of their private information. In this campanion paper, we show that for those analysts that report later in the forecast-horizon, a reward scheme that is convex in relative performance may shed some light on this strategic behavior. The pattern and magnitude of the forecast bias in the last forecast are identical to the results in Bernhardt et al., and slightly higher in some sub-samples. An analysis of daily returns around the date of earnings announcement reveals that investors do not fully unravel the bias in late forecasts.
Publisher:
ISBN:
Category :
Languages : en
Pages : 27
Book Description
In a recent paper, Bernhardt et al. (2004) developed a non-parametric test for bias in forecasts by professional financial analysts that is robust to correlated information amongst analysts and information arrival over the forecasting cycle. The tests show that analysts anti-herd: Analysts systematically issue biased contrarian forecasts that overshoot the publicly-available consensus forecast in the direction of their private information. In this campanion paper, we show that for those analysts that report later in the forecast-horizon, a reward scheme that is convex in relative performance may shed some light on this strategic behavior. The pattern and magnitude of the forecast bias in the last forecast are identical to the results in Bernhardt et al., and slightly higher in some sub-samples. An analysis of daily returns around the date of earnings announcement reveals that investors do not fully unravel the bias in late forecasts.
CEO Compensation Mix and Analysts' Forecast Accuracy and Bias
Author: Kiridaran (Giri) Kanagaretnam
Publisher:
ISBN:
Category :
Languages : en
Pages : 40
Book Description
We investigate the relation between the proportion of total compensation received by CEOs from stock options and the accuracy and bias of analysts' earnings forecasts. We hypothesize that forecast accuracy decreases as the proportion of stock option pay increases. Higher proportions of stock options induce managers to undertake riskier projects, to change and/or reallocate their effort, to manipulate accounting earnings, and to make opportunistic voluntary disclosures, resulting in an increase in the complexity of forecasting. We also examine the relation between forecast bias and the proportion of stock option pay. Analysts' optimistic forecast bias increases as the proportion of stock option pay increases. Because forecast complexity increases with stock option pay, analysts, needing greater access to management's information to produce accurate forecasts, have incentives to increase the optimistic bias in their forecasts. Our empirical evidence indicates that analysts' earnings forecast accuracy decreases and forecast optimism increases as the proportion of CEO compensation from stock options increases, even after controlling for previously identified determinants of forecasting difficulty.
Publisher:
ISBN:
Category :
Languages : en
Pages : 40
Book Description
We investigate the relation between the proportion of total compensation received by CEOs from stock options and the accuracy and bias of analysts' earnings forecasts. We hypothesize that forecast accuracy decreases as the proportion of stock option pay increases. Higher proportions of stock options induce managers to undertake riskier projects, to change and/or reallocate their effort, to manipulate accounting earnings, and to make opportunistic voluntary disclosures, resulting in an increase in the complexity of forecasting. We also examine the relation between forecast bias and the proportion of stock option pay. Analysts' optimistic forecast bias increases as the proportion of stock option pay increases. Because forecast complexity increases with stock option pay, analysts, needing greater access to management's information to produce accurate forecasts, have incentives to increase the optimistic bias in their forecasts. Our empirical evidence indicates that analysts' earnings forecast accuracy decreases and forecast optimism increases as the proportion of CEO compensation from stock options increases, even after controlling for previously identified determinants of forecasting difficulty.
Determinants of Earnings Forecast Error, Earnings Forecast Revision and Earnings Forecast Accuracy
Author: Sebastian Gell
Publisher: Springer Science & Business Media
ISBN: 3834939374
Category : Business & Economics
Languages : en
Pages : 144
Book Description
Earnings forecasts are ubiquitous in today’s financial markets. They are essential indicators of future firm performance and a starting point for firm valuation. Extremely inaccurate and overoptimistic forecasts during the most recent financial crisis have raised serious doubts regarding the reliability of such forecasts. This thesis therefore investigates new determinants of forecast errors and accuracy. In addition, new determinants of forecast revisions are examined. More specifically, the thesis answers the following questions: 1) How do analyst incentives lead to forecast errors? 2) How do changes in analyst incentives lead to forecast revisions?, and 3) What factors drive differences in forecast accuracy?
Publisher: Springer Science & Business Media
ISBN: 3834939374
Category : Business & Economics
Languages : en
Pages : 144
Book Description
Earnings forecasts are ubiquitous in today’s financial markets. They are essential indicators of future firm performance and a starting point for firm valuation. Extremely inaccurate and overoptimistic forecasts during the most recent financial crisis have raised serious doubts regarding the reliability of such forecasts. This thesis therefore investigates new determinants of forecast errors and accuracy. In addition, new determinants of forecast revisions are examined. More specifically, the thesis answers the following questions: 1) How do analyst incentives lead to forecast errors? 2) How do changes in analyst incentives lead to forecast revisions?, and 3) What factors drive differences in forecast accuracy?
Analysts' Incentives and Systematic Forecast Bias
Author: Senyo Y. Tse
Publisher:
ISBN:
Category :
Languages : en
Pages : 40
Book Description
The likelihood that earnings announcements meet or beat analyst expectations differs substantially and systematically across firms. Prior research explores managers incentives to meet analyst expectations. In this paper, we examine analysts incentives to issue systematically biased earnings forecasts and thereby influence the likelihood that firms report good earnings news. We first document that forecast biases are systematically different, as large firms and firms with low forecast dispersion - labeled high-information firms - are more likely to report positive earning surprises, while small firms and firms with large forecast dispersion - labeled low-information firms - tend to have optimistically biased forecasts that often lead to negative earnings surprises. We also show that potential financing needs induce more optimistic forecasts for low-information firms, but this effect is greatly mitigated for high-information firms. We find that career concerns help explain analysts' systematic forecast bias. An analyst's career longevity is enhanced by issuing pessimistic forecasts for high-information firms and optimistic forecasts for low-information firms. Optimistic forecast bias for high-financing-need firms has no consequence for an analyst's career longevity, but optimistic bias for low-financing-need firms hurts. Our results suggest that career concerns contribute to a systematic pattern of forecasting that aligns with managerial preferences.
Publisher:
ISBN:
Category :
Languages : en
Pages : 40
Book Description
The likelihood that earnings announcements meet or beat analyst expectations differs substantially and systematically across firms. Prior research explores managers incentives to meet analyst expectations. In this paper, we examine analysts incentives to issue systematically biased earnings forecasts and thereby influence the likelihood that firms report good earnings news. We first document that forecast biases are systematically different, as large firms and firms with low forecast dispersion - labeled high-information firms - are more likely to report positive earning surprises, while small firms and firms with large forecast dispersion - labeled low-information firms - tend to have optimistically biased forecasts that often lead to negative earnings surprises. We also show that potential financing needs induce more optimistic forecasts for low-information firms, but this effect is greatly mitigated for high-information firms. We find that career concerns help explain analysts' systematic forecast bias. An analyst's career longevity is enhanced by issuing pessimistic forecasts for high-information firms and optimistic forecasts for low-information firms. Optimistic forecast bias for high-financing-need firms has no consequence for an analyst's career longevity, but optimistic bias for low-financing-need firms hurts. Our results suggest that career concerns contribute to a systematic pattern of forecasting that aligns with managerial preferences.
Handbook of Financial Markets: Dynamics and Evolution
Author: Thorsten Hens
Publisher: Elsevier
ISBN: 0080921434
Category : Business & Economics
Languages : en
Pages : 607
Book Description
The models of portfolio selection and asset price dynamics in this volume seek to explain the market dynamics of asset prices. Presenting a range of analytical, empirical, and numerical techniques as well as several different modeling approaches, the authors depict the state of debate on the market selection hypothesis. By explicitly assuming the heterogeneity of investors, they present models that are descriptive and normative as well, making the volume useful for both finance theorists and financial practitioners. Explains the market dynamics of asset prices, offering insights about asset management approaches Assumes a heterogeneity of investors that yields descriptive and normative models of portfolio selections and asset pricing dynamics
Publisher: Elsevier
ISBN: 0080921434
Category : Business & Economics
Languages : en
Pages : 607
Book Description
The models of portfolio selection and asset price dynamics in this volume seek to explain the market dynamics of asset prices. Presenting a range of analytical, empirical, and numerical techniques as well as several different modeling approaches, the authors depict the state of debate on the market selection hypothesis. By explicitly assuming the heterogeneity of investors, they present models that are descriptive and normative as well, making the volume useful for both finance theorists and financial practitioners. Explains the market dynamics of asset prices, offering insights about asset management approaches Assumes a heterogeneity of investors that yields descriptive and normative models of portfolio selections and asset pricing dynamics
Financial Behavior
Author: Harold Kent Baker
Publisher: Oxford University Press
ISBN: 0190269995
Category : Business & Economics
Languages : en
Pages : 681
Book Description
Financial Behavior provides a synthesis of the theoretical and empirical literature on the financial behavior of major stakeholders, financial services, investment products, and financial markets. With diverse concepts and topics, the book brings together noted scholars and practitioners so readers can gain an in-depth understanding about cognitive and emotional biases that influence various financial decisions from experts from around the world.
Publisher: Oxford University Press
ISBN: 0190269995
Category : Business & Economics
Languages : en
Pages : 681
Book Description
Financial Behavior provides a synthesis of the theoretical and empirical literature on the financial behavior of major stakeholders, financial services, investment products, and financial markets. With diverse concepts and topics, the book brings together noted scholars and practitioners so readers can gain an in-depth understanding about cognitive and emotional biases that influence various financial decisions from experts from around the world.
Conflicts of Interest
Author: Luc Thévenoz
Publisher: Kluwer Law International B.V.
ISBN: 9041125787
Category : Law
Languages : en
Pages : 422
Book Description
Conflicts of interest arise naturally in all walks of life, particularly in business life. As general and indeed inevitable phenomena, conflicts of interest should not be prohibited but properly managed. This book presents indepth analysis of such management in three areas of corporate governance where the conflict-of-interest problems are particularly acute: executive compensation, financial analysis, and asset management. ""Conflicts of Interest"" presents the results of a two-year-long research project bringing together academics and practitioners in both law and finance from Europe and the.
Publisher: Kluwer Law International B.V.
ISBN: 9041125787
Category : Law
Languages : en
Pages : 422
Book Description
Conflicts of interest arise naturally in all walks of life, particularly in business life. As general and indeed inevitable phenomena, conflicts of interest should not be prohibited but properly managed. This book presents indepth analysis of such management in three areas of corporate governance where the conflict-of-interest problems are particularly acute: executive compensation, financial analysis, and asset management. ""Conflicts of Interest"" presents the results of a two-year-long research project bringing together academics and practitioners in both law and finance from Europe and the.
Advances in Quantitative Analysis of Finance and Accounting (New Series) Vol.15
Author: Cheng F. Lee
Publisher: Center for PBBEFR & Airiti Press
ISBN: 986628669X
Category : Business & Economics
Languages : en
Pages :
Book Description
Advances in Quantitative Analysis of Finance and Accounting (New Series) is an annual publication designed to disseminate developments in the quantitative analysis of finance and accounting. The publication is a forum for statistical and quantitative analyses of issues in finance and accounting as well as applications of quantitative methods to problems in financial management, financial accounting, and business management. The objective is to promote interaction between academic research in finance and accounting and applied research in the financial community and the accounting profession.
Publisher: Center for PBBEFR & Airiti Press
ISBN: 986628669X
Category : Business & Economics
Languages : en
Pages :
Book Description
Advances in Quantitative Analysis of Finance and Accounting (New Series) is an annual publication designed to disseminate developments in the quantitative analysis of finance and accounting. The publication is a forum for statistical and quantitative analyses of issues in finance and accounting as well as applications of quantitative methods to problems in financial management, financial accounting, and business management. The objective is to promote interaction between academic research in finance and accounting and applied research in the financial community and the accounting profession.
Program and Proceedings
Author: American Accounting Association
Publisher:
ISBN:
Category : Accounting
Languages : en
Pages : 366
Book Description
Publisher:
ISBN:
Category : Accounting
Languages : en
Pages : 366
Book Description
The Effect of Issuing Biased Earnings Forecasts on Analysts' Access to Management and Survival
Author: Bin Ke
Publisher:
ISBN:
Category :
Languages : en
Pages : 63
Book Description
This study offers evidence on the earnings forecast bias analysts use to please firm management and the associated benefits they obtain from issuing such biased forecasts in the years prior to Regulation Fair Disclosure. Analysts who issue initial optimistic earnings forecasts followed by pessimistic earnings forecasts before the earnings announcement produce more accurate earnings forecasts and are less likely to be fired by their employers. The effect of such biased earnings forecasts on forecast accuracy and firing is stronger for analysts who follow firms with heavy insider selling and hard-to-predict earnings. The above results hold regardless of whether a brokerage firm has investment banking business or not. These results are consistent with the hypothesis that analysts use biased earnings forecasts to curry favor with firm management in order to obtain better access to management's private information.
Publisher:
ISBN:
Category :
Languages : en
Pages : 63
Book Description
This study offers evidence on the earnings forecast bias analysts use to please firm management and the associated benefits they obtain from issuing such biased forecasts in the years prior to Regulation Fair Disclosure. Analysts who issue initial optimistic earnings forecasts followed by pessimistic earnings forecasts before the earnings announcement produce more accurate earnings forecasts and are less likely to be fired by their employers. The effect of such biased earnings forecasts on forecast accuracy and firing is stronger for analysts who follow firms with heavy insider selling and hard-to-predict earnings. The above results hold regardless of whether a brokerage firm has investment banking business or not. These results are consistent with the hypothesis that analysts use biased earnings forecasts to curry favor with firm management in order to obtain better access to management's private information.