Non-earnings Information and Analysts' Revisions of Future Earnings Forecasts PDF Download

Author: Mahmoud A. Alkhalialeh
Publisher:
ISBN:
Category : Accounting
Languages : en
Pages : 83

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Author: Peter A. Brous
Publisher:
ISBN:
Category :
Languages : en
Pages : 26

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Prior research suggests that financial analysts' earnings forecasts and stock prices underreact to earnings news. This paper provides evidence that analysts and investors correct this underreaction in response to the next earnings announcement and to other (non-earnings-surprise) information available between earnings announcements. Our evidence also suggests that analysts and investors underreact to information reflected in analysts' earnings forecast revisions and that non-earnings-surprise information helps correct this underreaction as well. Controlling for corrective non-earnings-surprise information significantly increases estimates of the degree to which analysts' forecasting behavior can explain drifts in returns following both earnings announcements and analysts' earnings forecast revisions.

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: Michael L. Ettredge
Publisher:
ISBN:
Category : Financial statements
Languages : en
Pages : 48

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Author: Martin S. Fridson
Publisher: John Wiley & Sons
ISBN: 1118064208
Category : Business & Economics
Languages : en
Pages : 405

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Book Description
The updated, real-world guide to interpreting and unpacking GAAP and non-GAAP financial statements In Financial Statement Analysis, 5th Edition, leading investment authority Martin Fridson returns with Fernando Alvarez to provide the analytical framework you need to scrutinize financial statements, whether you’re evaluating a company’s stock price or determining valuations for a merger or acquisition. Rather than taking financial statements at face value, you’ll learn practical and straightforward analytical techniques for uncovering the reality behind the numbers. This fully revised and up-to-date 5th Edition offers fresh information that will help you to evaluate financial statements in today’s volatile markets and uncertain economy. The declining connection between GAAP earnings and stock prices has introduced a need to discriminate between instructive and misleading non-GAAP alternatives. This book integrates the alternatives and provides guidance on understanding the extent to which non-GAAP reports, particularly from US companies, may be biased. Understanding financial statements is an essential skill for business professionals and investors. Most books on the subject proceed from the questionable premise that companies' objective is to present a true picture of their financial condition. A safer assumption is that they seek to minimize the cost of raising capital by portraying themselves in the most favorable light possible. Financial Statement Analysis teaches readers the tricks that companies use to mislead, so readers can more clearly interpret statements. Learn how to read and understand financial statements prepared according to GAAP and non-GAAP standards Compare CFROI, EVA, Valens, and other non-GAAP methodologies to determine how accurate companies’ reports are Improve your business decision making, stock valuations, or merger and acquisition strategy Develop the essential skill of quickly and accurately gathering and assessing information from financial statements of all types Professional analysts, investors, and students will gain valuable knowledge from this updated edition of the popular guide. Filled with real-life examples and expert advice, Financial Statement Analysis, 5th Edition, will help you interpret and unpack financial statements.

Author: Gregory Alan Sommers
Publisher:
ISBN:
Category :
Languages : en
Pages : 194

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Abstract: Questions have been raised in the business press and prior academic research about future years' earnings forecast credibility, particularly long-term growth. This paper documents the market response to revisions in analysts' earnings forecasts for the next year and long-term growth (collectively "future years' earnings"). First, I show there is information content in future years' earnings forecast revisions as evidenced by changes in return volatility and volume at their release. Second, there is a direct market response to the magnitudes of the revisions in the next years' earnings forecasts and to upward revisions in long-term growth forecasts as evidenced by the coefficient relating the unexpected returns to the unexpected portion of the revisions. Finally, I find that investors use the next year earnings forecasts interpret the expected persistence of current year earnings forecast revisions. This is evidenced by increases (decreases) in the coefficient relating unexpected returns to the current year earnings forecast revisions when the next year earnings forecast revision is in the same (opposite) direction. This study documents market response to future years' earnings forecast revisions and indicates that they affect how investors respond to the revisions in current year earnings forecasts.

Author: Eugene A. Imhoff, Jr. and Gerald J. Lobo
Publisher:
ISBN:
Category :
Languages : en
Pages : 29

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Author: Hamish Campbell Macalister
Publisher:
ISBN:
Category : Corporate profits
Languages : en
Pages : 300

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Book Description
I investigate the information in aggregated US equity analysts' earnings forecasts. Despite a voluminous body of research evaluating the information in, and characteristics of, equity analysts' forecasts, relatively little is known regarding aggregated forecasts. However, Kothari, Lewellen and Warner (2006) demonstrate how estimated relationships between, for example, earnings and returns may differ markedly at the aggregate level compared with the individual stock level. I generate time series of aggregated forecast earnings, aggregated forecast revisions and aggregated realized earnings for the period extending from the first quarter of 1979 through to the last quarter of 2009. These variables are employed in three examinations of aggregated earnings expectations. Firstly, prior research indicates significant information in analysts' forecasts for future realized earnings, and strong positive correlation between realized earnings and indicators of macroeconomic activity. I therefore hypothesize significant information in aggregated analysts' forecasts for future realized economic activity. Secondly, I investigate the informational efficiency of analysts' forecasts with respect to realized macroeconomic variables, and implications of earnings revision predictability for return predictability. Thirdly, I employ aggregated earnings revisions as proxies for market earnings surprise in tests of cash flow and discount rate effects in market returns. I find evidence of statistically significant information for future US industrial production growth in aggregated analysts' forecasts, the magnitude of which is a partial function of earnings smoothing by management, firm size and earnings cyclicality. I also find evidence of systematic underreaction by analysts to realized macroeconomic factors, resulting in revision predictability which in turn is able to explain significant systematic variation in future industry returns. In addition, my results suggest that the negative relationship between aggregated earnings surprise and contemporaneous returns identified by Kothari et al. (2006) is at least partially a product of the period they evaluate. In robustness tests employing both aggregated realized earnings and aggregated forecast revisions, I find evidence of positive (albeit insignificant) relationships between these proxies for earnings surprise and contemporaneous market returns. My results do not support the notion of a discount rate effect dominating a cash flow effect at the aggregate level.

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

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Book Description
The importance of information in the formation process of security prices has a long history. The dissemination of information can take on different forms depending on the legal constraints. However, in all developed financial markets, financial analysts play a prominent role in collecting, analysing and diffusing information. Financial analysts typically supply future earnings estimates and stock picking advices in the form of recommendations. Earnings estimates are the essential part of security valuation by analysts and investors. They have even become an integral part of financial reporting in the financial press. Early research has accumulated evidence that these estimates are optimistically biased. More recently, empirical studies have found that analysts' optimistic bias is lessening, that its extent differs across analysts, firm characteristics and countries. Broadly speaking, this dissertation investigates the determinants of financial analyst forecasts bias. In the first essay, I examine the relative accuracy of European financial analysts' earnings forecasts and its determinants. I show that the results obtained for US analysts can not be generalised to European analysts who face a seemingly different job market as well as several different institutional and economic environments. In the second essay, I investigate the influence of financial analysts' location on their performance. More precisely, I examine the relative performance of local versus foreign analysts on Latin American stock markets. I find foreign analysts to be more timely and more accurate than their local counterparts. In addition, I document stronger price reactions after foreign analysts' forecast revisions than after those of local analysts. The third essay is related to the declining pattern of financial analyst forecast bias. In particular, I investigate whether US CEOs compensation arrangements give CEOs incentives to manipulate analysts' expectations downward in order to release ea.

Author: Jeffery S. Abarbanell
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Book Description
This paper studies the information links that connect detailed financial statement data and security prices. We establish empirically the underlying relations between rules of fundamental analysis and: 1) analysts' earnings forecast revisions, 2) actual future earnings changes and 3) security returns. We find evidence that some but not all of the fundamental signals are related to subsequent earnings changes and analysts' revisions as hypothesized. Paradoxically, contemporaneous security returns reveal that, in the eyes of investors, the set of fundamental signals contain information orthogonal to analysts' revisions. Additional evidence suggests one explanation for this result is that analysts' forecast revisions are inefficient with respect to the future earnings information contained in some of the fundamental signals. One practical implication of our findings is that if analysts were to process efficiently the information in the fundamental signals, it would be sufficient to eliminate the well-documented phenomenon of analyst underreaction to prior earnings news.