Information in the Tails of the Distribution of Analysts' Quarterly Earnings Forecasts PDF Download
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Author: Philip B. Shane
Publisher:
ISBN:
Category :
Languages : en
Pages : 40
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Book Description
The business press generally reports news in quarterly earnings announcements based on the difference between actual earnings and two salient benchmarks: earnings of the same quarter in the previous year, and a consensus drawn from a distribution of forecasts by financial analysts. We evaluate the implications of a third salient benchmark: the most optimistic forecast when actual earnings exceed the consensus and the most pessimistic forecast when the consensus exceeds actual earnings. We find that considering the information in these tails of the distribution of analysts' earnings forecasts enhances the profitability of earnings-based momentum trading strategies.
Author: Philip B. Shane
Publisher:
ISBN:
Category :
Languages : en
Pages : 40
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Book Description
The business press generally reports news in quarterly earnings announcements based on the difference between actual earnings and two salient benchmarks: earnings of the same quarter in the previous year, and a consensus drawn from a distribution of forecasts by financial analysts. We evaluate the implications of a third salient benchmark: the most optimistic forecast when actual earnings exceed the consensus and the most pessimistic forecast when the consensus exceeds actual earnings. We find that considering the information in these tails of the distribution of analysts' earnings forecasts enhances the profitability of earnings-based momentum trading strategies.
Author: Abhiroop Mukherjee
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This paper focuses on the investment value of information contained in the tails of the analyst forecast distribution. I determine the investment value of the tails by looking at dissident analysts -- who release EPS forecasts far from the prevailing consensus. I then test the hypothesis that analysts who release such bold forecasts possess superior information not fully recognized by the market. Next, I provide evidence suggesting that the source of advantage outlined in this strategy was probably private information, rather than superior analyst ability in assessing public data. Finally, I relate this phenomenon to the question of limited investor attention by showing that investors do seem to appreciate the incremental information content of bold forecasts, but find it difficult to process such information when the processing requirement is more demanding. As a result, portfolio profits based on a dissidence strategy are insignificant and small in the sample of stocks followed by few analysts - where investors can easily notice the outliers- as compared to the large significant profits obtainable in the sample of stocks covered by many analysts.
Author: Michael L. Ettredge
Publisher:
ISBN:
Category : Financial statements
Languages : en
Pages : 48
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Book Description
Author: Lise Newman Graham
Publisher:
ISBN:
Category : Corporate profits
Languages : en
Pages : 334
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Book Description
Author: Daniel A. Cohen
Publisher:
ISBN:
Category :
Languages : en
Pages : 31
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Book Description
Abarbanell and Lehavy provide evidence that analysts' forecast errors are not normally distributed exhibiting a high occurrence of extreme negative forecast errors (left-tail asymmetry) and a high occurrence of small positive forecast errors (middle asymmetry). This is important for researchers who rely on techniques that are sensitive to the distributional assumptions of analysts' forecast errors. Many of the conclusions drawn by Abarbanell and Lehavy, however, are based on visual impressions (as opposed to formal empirical tests) or based on methods that are very sensitive to the empirical methods used (e.g., whether the serial correlation of forecast errors is caused by the left-tail asymmetry).
Author: Shu Yeh
Publisher:
ISBN:
Category : Corporation reports
Languages : en
Pages : 220
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Book Description
Author: Richard H. Thaler
Publisher: Princeton University Press
ISBN: 0691121753
Category : Business & Economics
Languages : en
Pages : 739
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Book Description
A definitive and wide-ranging overview of developments in behavioural finance over the past ten years. This second volume presents twenty recent papers by leading specialists that illustrate the abiding power of behavioural finance.
Author: Stephen M. Black
Publisher:
ISBN:
Category :
Languages : en
Pages : 304
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Book Description
Author: Jeffery S. Abarbanell
Publisher:
ISBN:
Category :
Languages : en
Pages : 52
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Book Description
We demonstrate the role of three empirical properties of cross-sectional distributions of analysts' forecast errors in generating evidence pertinent to three important and heretofore separately analyzed phenomena studied in the analyst earnings forecast literature: purported bias (intentional or unintentional) in analysts' earnings forecasts, forecaster over/underreaction to information in prior realizations of economic variables, and positive serial correlation in analysts' forecast errors. The empirical properties of interest include: the existence of two statistically influential asymmetries found in the tail and the middle of typical forecast error distributions, the fact that a relatively small number of observations comprise these asymmetries and, the unusual character of the reported earnings benchmark used in the calculation of the forecast errors that fall into the two asymmetries that is associated with firm recognition of unexpected accruals. We discuss competing explanations for the presence of these properties of forecast error distributions and their implications for conclusions about analyst forecast rationality that are pertinent to researchers, regulators, and investors concerned with the incentives and judgments of analysts.Previously titled quot;Biased Forecasts or Biased Earnings? The Role of Earnings Management in Explaining Apparent Optimism and Inefficiency in Analysts' Earnings Forecastsquot.
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.
