New Determinants of Analysts’ Earnings Forecast Accuracy PDF Download

Author: Tanja Klettke
Publisher: Springer Science & Business
ISBN: 3658056347
Category : Business & Economics
Languages : en
Pages : 120

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Book Description
Financial analysts provide information in their research reports and thereby help forming expectations of a firm’s future business performance. Thus, it is essential to recognize analysts who provide the most precise forecasts and the accounting literature identifies characteristics that help finding the most accurate analysts. Tanja Klettke detects new relationships and identifies two new determinants of earnings forecast accuracy. These new determinants are an analyst’s “general forecast effort” and the “number of supplementary forecasts”. Within two comprehensive empirical investigations she proves these measures’ power to explain accuracy differences. Tanja Klettke’s research helps investors and researchers to identify more accurate earnings forecasts.

Author: Praveen Sinha
Publisher:
ISBN:
Category :
Languages : en
Pages : 42

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Book Description
This research re-examines whether there are differences in the forecast accuracy of financial analysts by comparing their annual earnings per share forecasts. The comparison of analyst forecast accuracy is made on both an ex post (within sample) and an ex ante (out of sample) basis. Early examinations of this issue by O'Brien (1990), Richards (1976), Brown and Rozeff (1980), O'Brien (1987), Coggin and Hunter (1989), Butler and Lang (1991) were ex post and suggest the absence of analysts who can provide relatively more accurate forecasts over multiple years. Contrary to the results of prior research, and consistent with the belief in the popular press, we document that differences do exist in financial analysts' ex post forecast accuracy. We show that the previous studies failed to find differences in forecast accuracy due to inadequate (or no) control for differences in the recency of forecasts issued by the analysts. It has been well documented in the literature that forecast recency is positively related to forecast accuracy (Crichfield, et al, 1978; O'Brien, 1988; Brown, 1991). Thus, failure to control for forecast recency may reduce the power of tests, making it difficult to reject the null hypothesis of no differences in forecast accuracy even if they do exist.

Author: Elisa Cavezzali
Publisher:
ISBN:
Category :
Languages : en
Pages : 45

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Book Description
This paper investigates whether the geographical proximity of financial analysts to hubs of information and expertise can influence their forecasting accuracy. Recent studies show that the financial analyst forecasting process show a systematic difference in earnings forecast accuracy dependent on the geographical distance of analysts from the companies which they follow. The literature argues that local analysts issue more accurate forecasts because they have an informational advantage over analysts who are further away. Industrial centres can constitute important knowledge spillovers by creating formal and informal networks amongst firms and higher education and research institutions. In such a hub, information can easily flow and propagate. Our hypothesis is that physical proximity to these hubs, and not to the companies they follow, is an advantage for financial analysts, leading to the issue of more accurate forecasts. Using a sample of 205 observations related to 33 firms, across seven countries and ten sectors, our results are consistent with the hypothesis. Even though preliminary, and probably in part biased by sample selection issues, overall, the empirical evidence confirms the benefit of being part of a network, formal or informal, in which information, knowledge and expertise sharing can flow easily. We try to give some new evidence on what can cause variations in financial analyst accuracy by exploring these concepts, well known and analysed in other fields, but new in the context of financial analysts.

Author: Lawrence D. Brown
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Author: Sundaresh Ramnath
Publisher: Now Publishers Inc
ISBN: 1601981627
Category : Business & Economics
Languages : en
Pages : 125

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Book Description
Financial Analysts' Forecasts and Stock Recommendations reviews research related to the role of financial analysts in the allocation of resources in capital markets. The authors provide an organized look at the literature, with particular attention to important questions that remain open for further research. They focus research related to analysts' decision processes and the usefulness of their forecasts and stock recommendations. Some of the major surveys were published in the early 1990's and since then no less than 250 papers related to financial analysts have appeared in the nine major research journals that we used to launch our review of the literature. The research has evolved from descriptions of the statistical properties of analysts' forecasts to investigations of the incentives and decision processes that give rise to those properties. However, in spite of this broader focus, much of analysts' decision processes and the market's mechanism of drawing a useful consensus from the combination of individual analysts' decisions remain hidden in a black box. What do we know about the relevant valuation metrics and the mechanism by which analysts and investors translate forecasts into present equity values? What do we know about the heuristics relied upon by analysts and the market and the appropriateness of their use? Financial Analysts' Forecasts and Stock Recommendations examines these and other questions and concludes by highlighting area for future research.

Author: Kathryn Kadous
Publisher:
ISBN:
Category :
Languages : en
Pages : 41

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Book Description
This paper reports the results of an experiment that examines how analyst forecast accuracy (i.e., how close an analyst's forecast is to realized earnings) and forecast boldness (i.e. how far the analyst's forecast is from the consensus forecast) affect the analyst's perceived credibility and investors' willingness to rely on and purchase the analyst's future reports. We hypothesize and find that forecast boldness magnifies the effect of forecast accuracy on these variables. That is, analysts who provide accurate, bold forecasts experience more positive consequences than those who provide accurate, non-bold forecasts, and analysts who provide inaccurate, bold forecasts experience more negative consequences than those who provide inaccurate, non-bold forecasts. We also find that these effects are not symmetric - the negative consequences of being bold and inaccurate exceed positive consequences of being bold and accurate. Our results are not sensitive to the level of the analyst's prior reputation.

Author: Andrew Stotz
Publisher:
ISBN:
Category :
Languages : en
Pages : 122

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Book Description
Over the past 12 years, financial analysts across the world have been optimistically wrong with their 12-month earnings forecasts by 25.3%. This study may be the first of its kind to assess analyst earnings forecast accuracy at all listed companies across the globe, covering 70 countries. A review of prior research shows little uniformity in the preparation of the data set, yet differences in how outliers are treated, for example, can create substantially different results. This research lays out six specific steps to prepare the data set before any analysis is done.Three main conclusions come from this research: First, analyst earnings forecasts globally were 25.3% optimistically wrong, meaning on average, analysts started each year forecasting company profits of US$125, but 12 months later that company reported profits of US$100. Second, analysts had a harder time forecasting earnings for companies in emerging markets, where they were 35% optimistically wrong. Third, that analyst optimism mainly occurred when the companies they forecasted experienced very low levels of actual earnings growth, analysts did not make an equal, but opposite error for fast growth companies.

Author: Jahidur Md Rahman
Publisher:
ISBN:
Category :
Languages : en
Pages : 18

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Book Description
This study conducts a comprehensive review of the literature published during 1996- 2017 to identify the factors that affect the accuracy of financial analysts' forecasts. We organize our review around three main groups, namely, (a) drivers of analyst forecast accuracy, (b) quality financial reporting, and (c) accounting standards. Among the several factors found, some factors (experience of the analyst, earnings quality, audit quality, IFRS adoption, and annual report readability) have a positive relationship with the accuracy of analysts' forecasts while others (politically connected firms, firms audited by Non-Big 4, and international GAAP differences) have a negative relationship. Our findings contribute to future research by examining the factors affecting analyst forecast accuracy from different perspectives, which will prove to be useful for academicians, regulators, investors, and financial analysts.

Author: Marvin Pfister
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Book Description
This thesis analyses the effect of language differences to English on financial analysts' earnings forecast accuracy in the context of conference calls in Continental Western Europe. By adopting different perspectives, the influence of analysts', senior executives', and firms' language distance relative to English is examined applying various statistical methods. Empirical results support the hypotheses that the greater the language distance to English, the lower the accuracy of financial analysts' forecasts. Additional statistical examinations consider the impact on accuracy of operational complexity in terms of firms' business segment diversification as well as geographical dispersion. Moreover, interaction effects are detected by treating operational complexity as moderators. The study's findings not only advance research on accounting, finance, and intercultural communication literature but also provide new insights into the interaction of analysts and managers and thus contribute to investor relations research.

Author: Wenjuan Xie
Publisher:
ISBN:
Category :
Languages : en
Pages : 42

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Book Description
This study examines the impact of unidentifiable individual differences among financial analysts on the cross section of their earnings forecast accuracy. Various psychological factors, such as decision style and personality traits, are documented to impact individuals' decision making. However, analysts' individual differences in such psychological factors are not captured by identifiable personal attributes employed in finance literature, such as years of experience. In this paper, we employ the concept of analyst fixed effects to control for unidentifiable individual differences. Examining the factors related to forecast accuracy, we document that controlling for these unidentifiable analyst-specific effects improves model fitting, and changes the explanatory power of some of the traditionally used independent variables in the literature. We confirm that the analyst's firm-specific experience, the intensity of following that a firm receives, and the forecast horizon are all significantly and consistently related to forecast accuracy. However, we find that analyst general experience and coverage complexity lose explanatory power when individual differences are controlled for. Furthermore, we document that analyst general experience is not monotonically associated with better accuracy, and that analysts only benefit from increased general experience during the early to middle stages of their career. Finally, we observe that when analysts' individual differences are controlled for, the boldness of a forecast revision is no longer a significant determinant of the improvement of accuracy. This is one of the first studies to highlight the necessity of recognizing individual differences among financial analysts. We argue that this treatment advances the literature of analyst forecast performance, and closely relates financial agents' decision making to psychology theories of decision style and personality.