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Author: Keiichi Kubota Publisher: ISBN: Category : Languages : en Pages : 40
Book Description
This paper investigates how accurately the information contained in accounting accruals and their components are impounded into stock prices and provide evidence on the accounting accruals and the revisions of analyst earnings forecasts in terms of pricing or mispricing the stock. The results from the regression analyses with pooled data and the ones from the cross-sectional Fama and MacBeth tests unanimously suggest that the accounting accruals and their components, in particular, the abnormal accruals, have significant explanatory power in explaining the future stock returns, even after adjusting for the systematic risk of the stocks. Second, we conduct hedging portfolio tests and find that the accruals information helps investors earn abnormal returns. Finally, we investigate the relationship between the abnormal accruals and the revisions of analyst earnings forecasts. We find that the larger the abnormal accruals of the firms, the higher the subsequent downward revisions of analyst forecasts. The evidence indicates that the analysts fail to incorporate the full implications of accruals information in forming their forecasts, even though such an overestimation or underestimation eventually is corrected as the next year's earnings related information becomes publicly available.
Author: Keiichi Kubota Publisher: ISBN: Category : Languages : en Pages : 40
Book Description
This paper investigates how accurately the information contained in accounting accruals and their components are impounded into stock prices and provide evidence on the accounting accruals and the revisions of analyst earnings forecasts in terms of pricing or mispricing the stock. The results from the regression analyses with pooled data and the ones from the cross-sectional Fama and MacBeth tests unanimously suggest that the accounting accruals and their components, in particular, the abnormal accruals, have significant explanatory power in explaining the future stock returns, even after adjusting for the systematic risk of the stocks. Second, we conduct hedging portfolio tests and find that the accruals information helps investors earn abnormal returns. Finally, we investigate the relationship between the abnormal accruals and the revisions of analyst earnings forecasts. We find that the larger the abnormal accruals of the firms, the higher the subsequent downward revisions of analyst forecasts. The evidence indicates that the analysts fail to incorporate the full implications of accruals information in forming their forecasts, even though such an overestimation or underestimation eventually is corrected as the next year's earnings related information becomes publicly available.
Author: Mary E. Barth Publisher: ISBN: Category : Languages : en Pages : 66
Book Description
We test predictions relating to the role of financial analysts in aiding investors' assessment of the different valuation implications of the cash flow and accrual components of earnings. First, we examine whether analysts revise their forecasts of future earnings in anticipation of predictable accrual reversals. Then, we examine whether share prices reflect predictable accrual reversals differently depending on analyst activity. Our findings suggest that analysts act as sophisticated information intermediaries in that some analysts are able to identify firms with less persistent accruals. However, share prices do not reflect the information conveyed by analyst forecast revisions. Rather, investors appear to expect the same persistence in earnings, regardless of its cash flow and accrual components and regardless of analyst activity, until the accruals reverse. Thus, incorporating information from analyst activity substantially improves short-term returns to an accrual-based trading strategy.
Author: Sundaresh Ramnath Publisher: Now Publishers Inc ISBN: 1601981627 Category : Business & Economics Languages : en Pages : 125
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: Cheng-Few Lee Publisher: Center for PBBEFR & Airiti Press ISBN: 9868518245 Category : Business & Economics Languages : en Pages : 304
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. The papers in this volume cover a wide range of topics including corporate finance and debt management, earnings management, equity market, auditing, option pricing theory, and interest rate theory. In this volume there are eleven chapters, five of them are corporate finance and debt management: 1. Liquidity and Adverse Selection: Evidence from the Five-or-Fewer Rule Change; 2. Changing Business Environment and the Value of Relevance of Accounting Information; 3. Pricing Risky Securities in Hidden Markov-Modulated Poisson Processes; 4. An Empirical Assessment of Alternative Dividend Expectation Models; 5. Quantitative Market Risk Disclosure, Bond Default Risk and The Cost of Debt: Why Value At Risk? There are two of the other six chapters which cover interest rate theory: 1. Positive Interest Rates and Yields: Additional Serious Considerations; 2. Collapse of Dimensionality in the Interest Rate Term Structure. The remaining four chapters cover financial analysts earnings forecasts, equity market, auditing, and option pricing theory. These four papers are: 1. Investors’ Apparent Under-weighting of Financial Analysts’ Earnings Forecasts: The Role of Share Price Scaling and Omitted Risk Factors; 2. Predicting Stock Price by Applying the Residual Income Model and Bayesian Statistics; 3. Intertemporal Associations Between Non-Audit Services and Auditors’ Tendency to Allow Discretionary Accruals; 4. Put Option Portfolio Insurance vs. Asset Allocation.
Author: Ramesh Narayana Chari Publisher: ISBN: Category : Languages : en Pages : 140
Book Description
This research investigates whether financial analysts fully incorporate the information contained in accrual and cash flow components of current earnings when forecasting future earnings. I present evidence that analysts fail to fully incorporate the implications of these components for earnings persistence in their forecasts. Analysts' appear to ignore information in past earnings to a greater extent when the magnitude of accruals in prior year earnings is large relative to cash flows. I find that information in these components can be used to improve analysts' forecasts. This improvement is most evident for firms which have a high incidence of accruals in prior year earnings. I demonstrate the economic significance of improving analysts' forecasts by implementing a trading strategy that predicts stock price changes. This trading strategy yields significantly positive risk-adjusted abnormal returns. These results suggest that analysts' forecasting inefficiency (see Mendenhall, 1991) is potentially rooted in their misperceptions about the implications of accruals and cash flows for earnings persistence. These findings are useful to accounting standard-setters and to capital markets research that uses analysts' forecasts to proxy for earnings expectations.
Author: Daniel Kreutzmann Publisher: Logos Verlag Berlin GmbH ISBN: 3832525297 Category : Business & Economics Languages : en Pages : 141
Book Description
This thesis focuses on the three primitive value drivers of each company valuation model that is based on fundamental analysis: the discount rate, the expected future payoffs during the explicit forecasting period, and the terminal value at the end of the explicit forecasting period. While the first factor is analyzed theoretically by incorporating the government into the classical valuation framework, this thesis studies the other two factors by investigating forecasts made by professional investors, i.e. financial analysts. In the first part we show that the government's and the shareholders discount rate usually differ and analyze how the government's and shareholders different objectives lead to conflicts in the context of capital budgeting. The empirical part of this thesis shows that macroeconomic information is frequently used by financial analysts when updating their earnings expecations and that target price forecastsmade by financial analysts can be used to predict abnormal returns.
Author: Keiichi Kubota
Author: Keiichi Kubota
Author: Mary E. Barth
Author: Mary E. Barth
Author: Sundaresh Ramnath
Author: Michael L. Ettredge
Author: Cheng-Few Lee
Author: Ramesh Narayana Chari
Author: Mahmoud A. Alkhalialeh
Author: Daniel Kreutzmann
Author: Sanjay Wikash Bissessur