Consistency Between Earnings Forecasts and Stock Recommendations PDF Download
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Author: Elio Alfonso
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Elio Alfonso
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: Lawrence D. Brown
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
We investigate the implications of recommendation-forecast consistency for the informativeness of stock recommendations and earnings forecasts and the quality of analysts' earnings forecasts. Stock recommendations and earnings forecasts are often issued simultaneously and evaluated jointly by investors. However, the two signals are often inconsistent with each other. Defining a recommendation-forecast pair as consistent if both of them are above or below their existing consensus, we find that 58.3% of recommendation-forecast pairs are consistent in our sample. We document that consistent pairs result in much stronger market reactions than inconsistent pairs. We show that analysts making consistent recommendation-forecasts make more accurate and timelier forecasts than do analysts making inconsistent recommendation-forecasts, suggesting that consistent analysts make higher quality earnings forecasts. We extend the literature on informativeness of analyst research by showing that recommendation-forecast consistency is an important ex ante signal regarding both firm valuation and earnings forecast quality. Investors and researchers can use consistency as a salient, ex ante signal to identify more informative analyst research and superior earnings forecasts.
Author: Andreas Simon
Publisher:
ISBN:
Category :
Languages : en
Pages : 42
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Book Description
We examine how analysts' incentives to build their reputation through accurate forecasting changes the relative association between analyst recommendations and rigorous valuation models versus valuation heuristics. Controlling for the firm-specific difficulty of valuation, we show that the recommendations of the most accurate forecasters within each industry have a significantly higher correlation with rigorous valuation models and a significantly lower correlation with valuation heuristics than their less accurate peers. Our results are robust to potentially confounding firm-specific effects using a within-firm sample design, a changes analysis, and for short-term, long-term and combined measures of forecast accuracy. Consistent with reputation building, we find that the recommendations of ldquo;All-Starrdquo; analysts and accurate forecasters have similar associations on rigorous and heuristic valuation approaches. Our results are consistent with the incentive to build a good reputation mitigating the influence of factors other than identifying mispriced securities, using fundamental analysis, on stock recommendations.
Author: Mark T. Bradshaw
Publisher:
ISBN:
Category :
Languages : en
Pages : 44
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Book Description
Sell-side analysts summarize their opinions about stocks with earnings forecasts and stock recommendations. Because earnings forecasts reflect future fundamentals, and future fundamentals determine value, forecasts and recommendations should be related. In this paper, I test for evidence of such a relation. Using analysts' earnings forecasts in conjunction with the residual income valuation model, I generate intrinsic value estimates for a comprehensive range of plausible calibrations of the model parameters. I find that analysts' stock recommendations are generally unrelated to the deviation of intrinsic value estimates from trading prices. Extending this analysis to consider value estimates generated by a valuation heuristic documented in prior research, I find the heuristic valuations to be strongly related to analysts' stock recommendations. Taken together, the evidence suggests that analysts incorporate their earnings forecasts into their recommendations in a manner consistent with earnings-based heuristics rather than a discounted present value valuation model. The evidence presented here for the behavior of analysts is consistent with prior evidence showing over-extrapolation of growth and earnings persistence in stock prices.
Author: Gerald J. Lobo
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This study investigates the relationship between the dispersion of analysts' earnings forecasts and stock price variability around quarterly earnings announcements. Consistent with theoretical predictions, the empirical analysis shows that stock price variability at the time of earnings announcements is positively related to the degree of analysts' earnings forecast dispersion. The analysis also demonstrates that stock price variability is significantly greater from two days before to two days after the earnings announcement for firms ranked in the bottom third on the basis of analysts' forecast dispersion, whereas it is significantly greater from eight days prior to five days following the earnings announcement for firms in the top third. These results suggest that there is information about the earnings announcement that becomes available to at least a subset of investors prior to the earnings release. The increased level of price variability for five days following the earnings announcement suggests that market participants take different amounts of time to process the information conveyed by the earnings announcement.
Author: Samuel S. Tung
Publisher:
ISBN:
Category :
Languages : en
Pages : 28
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Book Description
This study investigates the relationship between the dispersion of analysts? earnings forecasts and stock price variability around quarterly earnings announcements. Consistent with theoretical predictions, the empirical analysis shows that stock price variability at the time of earnings announcements is positively related to the degree of analysts? earnings forecast dispersion. The analysis also demonstrates that stock price variability is significantly greater from two days before to two days after the earnings announcement for firms ranked in the bottom third on the basis of analysts? forecast dispersion, whereas it is significantly greater from eight days prior to five days following the earnings announcement for firms in the top third. These results suggest that there is information about the earnings announcement that becomes available to at least a subset of investors prior to the earnings release. The increased level of price variability for five days following the earnings announcement suggests that market participants take different amounts of time to process the information conveyed by the earnings announcement.
Author: Severin Stefanini
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This master thesis simultaneously examines both major outputs of equity research sell-side analysts - earnings forecasts and stock recommendations. It analyzes the stock recommendation performance of analysts that are ranked and sorted according to objective measures of their relative earnings forecasting ability, i.e. their accuracy, timeliness, consistency and boldness. Analysts who issue more accurate earnings forecasts are found to also generate more profitable and thus superior stock recommendations. In addition, stocks recommended by less bold analysts, whose forecasts deviate less from the consensus consisting of the forecasts of all other analysts, are shown to perform significantly worse than the ones issued by their bolder counterparts. No statistical evidence is found that would suggest that timelier or more consistent analysts issue superior stock recommendations.
Author: William Kross
Publisher:
ISBN:
Category :
Languages : en
Pages : 44
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Book Description
This paper provides evidence that firms that have consistently met or beaten analysts' earnings expectations (MBE) provide more frequent “bad news” management forecasts than firms with no established string of MBE, particularly when existing analyst forecasts are optimistic. This suggests that firms with a consistent MBE record are more likely to guide analysts' expectations downward to avoid breaking the consistency. Subsequent analyst forecast revisions following bad news management forecasts issued by these firms are dampened, implying that analysts suspect that these forecasts may be opportunistic. The relation between management forecasts and MBE consistency is stronger after Regulation FD.
Author: United States. Congress. Senate. Committee on Banking, Housing, and Urban Affairs
Publisher:
ISBN:
Category : Business & Economics
Languages : en
Pages : 136
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