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Author: Lawrence D. Brown Publisher: ISBN: Category : Languages : en Pages : 35
Book Description
The state of the art in the analyst forecasting literature is that earnings forecast ability is firm-specific (Chen, Francis, and Jiang 2005; Chen and Jiang 2006). This view is based on Park and Stice (2000)'s finding of the absence of a spillover effect; i.e., when reacting to analyst forecast revisions of firm j, investors ignore analyst forecast ability with respect to firm k. We provide an economic rationale for the absence of a spillover effect. We demonstrate that firm-specific ability is far more important than the spillover effect for the purpose of distinguishing between superior and inferior analysts in holdout periods, suggesting that investors are rational to pay little heed to this effect. We examine the issue of whether analyst earnings forecast ability is firm specific by introducing a general ability effect, defined as analyst accuracy for all the other firms s/he follows. We show that general ability is far more important than firm-specific ability for the purpose of distinguishing between superior and inferior analysts in holdout periods. We also document that investors are rational with respect to general ability; when reacting to analyst forecast revisions, they pay more attention to general ability than to firm-specific ability. We conclude that analyst earnings forecast ability is not firm-specific and that investors are rational regarding the relative attention they pay to general ability (much), firm-specific ability (some) and the spillover effect (none).
Author: Lawrence D. Brown Publisher: ISBN: Category : Languages : en Pages : 35
Book Description
The state of the art in the analyst forecasting literature is that earnings forecast ability is firm-specific (Chen, Francis, and Jiang 2005; Chen and Jiang 2006). This view is based on Park and Stice (2000)'s finding of the absence of a spillover effect; i.e., when reacting to analyst forecast revisions of firm j, investors ignore analyst forecast ability with respect to firm k. We provide an economic rationale for the absence of a spillover effect. We demonstrate that firm-specific ability is far more important than the spillover effect for the purpose of distinguishing between superior and inferior analysts in holdout periods, suggesting that investors are rational to pay little heed to this effect. We examine the issue of whether analyst earnings forecast ability is firm specific by introducing a general ability effect, defined as analyst accuracy for all the other firms s/he follows. We show that general ability is far more important than firm-specific ability for the purpose of distinguishing between superior and inferior analysts in holdout periods. We also document that investors are rational with respect to general ability; when reacting to analyst forecast revisions, they pay more attention to general ability than to firm-specific ability. We conclude that analyst earnings forecast ability is not firm-specific and that investors are rational regarding the relative attention they pay to general ability (much), firm-specific ability (some) and the spillover effect (none).
Author: Tanja Klettke Publisher: Springer Science & Business ISBN: 3658056347 Category : Business & Economics Languages : en Pages : 120
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: 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?
Author: Louis K.C. Chan Publisher: ISBN: Category : Languages : en Pages :
Book Description
Investors and the financial media apparently believe that some Wall Street equity analysts research is superior to others. We examine whether such quality differentials exist, in terms of analysts ability to forecast earnings accurately, and whether these differentials are identifiable on an ex ante basis. The results suggest that there is some persistence in analysts forecast accuracy. In particular, forecast accuracy is associated with analyst experience, breadth of coverage, timeliness, and brokerage firm size. Analysts selected for All-Star status by industry publications also tend to have higher forecast accuracy. However, the differences in forecast accuracy do not produce material differences in the dollar magnitudes of forecast errors.
Author: Frank J. Fabozzi Publisher: John Wiley & Sons ISBN: 0471488933 Category : Business & Economics Languages : en Pages : 1023
Book Description
Financial Management and Analysis, Second Edition covers many important financial topics that are neglected elsewhere--from raising funds via securitization to managing a financial institution. This book provides valuable insights into many major aspects of financial management and analysis, and includes expert advice, real-world examples, useful charts and graphs, and incisive end-of-chapter questions that help develop the skill set necessary to deal with the important financial problems encountered in today's business world.
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: World Scientific ISBN: 9811202400 Category : Business & Economics Languages : en Pages : 5053
Book Description
This four-volume handbook covers important concepts and tools used in the fields of financial econometrics, mathematics, statistics, and machine learning. Econometric methods have been applied in asset pricing, corporate finance, international finance, options and futures, risk management, and in stress testing for financial institutions. This handbook discusses a variety of econometric methods, including single equation multiple regression, simultaneous equation regression, and panel data analysis, among others. It also covers statistical distributions, such as the binomial and log normal distributions, in light of their applications to portfolio theory and asset management in addition to their use in research regarding options and futures contracts.In both theory and methodology, we need to rely upon mathematics, which includes linear algebra, geometry, differential equations, Stochastic differential equation (Ito calculus), optimization, constrained optimization, and others. These forms of mathematics have been used to derive capital market line, security market line (capital asset pricing model), option pricing model, portfolio analysis, and others.In recent times, an increased importance has been given to computer technology in financial research. Different computer languages and programming techniques are important tools for empirical research in finance. Hence, simulation, machine learning, big data, and financial payments are explored in this handbook.Led by Distinguished Professor Cheng Few Lee from Rutgers University, this multi-volume work integrates theoretical, methodological, and practical issues based on his years of academic and industry experience.
Author: Yuyan Guan Publisher: ISBN: 9780494219447 Category : Languages : en Pages : 230
Book Description
This thesis examines the determinants of analysts' reactions to firms' earnings management. I present a model showing that analysts revise their forecasts according to their forecast errors revealed by earnings announcements and reporting biases embedded in reported earnings. The model further demonstrates that the relationship between forecast revisions and reporting biases can be affected by analysts' forecasting ability, the inherent uncertainty of whether reporting biases have occurred, as well as analysts' incentives. To empirically test the model's prediction regarding analysts' forecasting ability, I use analysts' firm-specific experience, size of their brokerage firm, and the number of industries they follow as proxies. Consistent with the model's prediction, I provide evidence showing that well-experienced analysts adjust more for earnings management while analysts following a greater number of industries adjust less for earnings management. Sensitivity analysis using analyst's historical firm-specific forecast accuracy as an alternative measure of forecasting ability further supports the hypothesis that analysts with better forecasting ability adjust more for earnings management. Moreover, analysts adjust less for earnings management when the inherent uncertainty of the reporting bias is greater. Specifically, analysts adjust less for earnings management when: (1) the past volatility of discretionary accruals is high; and (2) the firm has a marked propensity to smooth earnings. There is little evidence that affiliated analysts adjust less for earnings management than unaffiliated analysts. However, analysts adjust more for earnings management in the post-Reg FD period than in the pre-Reg FD period, which is consistent with Regulation FD achieving its objective of strengthening analysts' incentives to issue unbiased forecasts.
Author: Lawrence D. Brown
Author: Lawrence D. Brown
Author: Tanja Klettke
Author: Sebastian Gell
Author: Louis K.C. Chan
Author: Wenjuan Xie
Author: Frank J. Fabozzi
Author: Sundaresh Ramnath
Author: PATRICIA C. O'BRIEN
Author: Cheng Few Lee
Author: Yuyan Guan