Systematic Optimism in Financial Analysts' Earnings Forecasts PDF Download
Are you looking for read ebook online? Search for your book and save it on your Kindle device, PC, phones or tablets. Download Systematic Optimism in Financial Analysts' Earnings Forecasts PDF full book. Access full book title Systematic Optimism in Financial Analysts' Earnings Forecasts by Dmitri Yu Kantsyrev. Download full books in PDF and EPUB format.
Author: Dmitri Yu Kantsyrev
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
This study examines forecast errors in financial analysts' annual earnings forecasts and finds that analysts exhibit systematic optimism for a specific subset of companies. The magnitude of the analysts' optimistic forecast bias increases with the difficulty of the forecasting task, which is represented by statistical characteristics of a firm's earnings as well as the overall economic activity. We find that both the mean and median forecast errors are largest for companies with the most volatile earnings that move against or independently of the market earnings. We also develop a model of the analysts' forecasting behavior and provide evidence that the analysts' optimistic forecast error increases in periods of economic downturns, and somewhat slowly decreases throughout the forecast horizon. In contrast to most of the existing literature, which deals with samples, we analyze all available consensus as well as timely constructed forecasts for the 1987-2004 period.
Author: Dmitri Yu Kantsyrev
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
This study examines forecast errors in financial analysts' annual earnings forecasts and finds that analysts exhibit systematic optimism for a specific subset of companies. The magnitude of the analysts' optimistic forecast bias increases with the difficulty of the forecasting task, which is represented by statistical characteristics of a firm's earnings as well as the overall economic activity. We find that both the mean and median forecast errors are largest for companies with the most volatile earnings that move against or independently of the market earnings. We also develop a model of the analysts' forecasting behavior and provide evidence that the analysts' optimistic forecast error increases in periods of economic downturns, and somewhat slowly decreases throughout the forecast horizon. In contrast to most of the existing literature, which deals with samples, we analyze all available consensus as well as timely constructed forecasts for the 1987-2004 period.
Author: John C. Easterwood
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
A rational analysis of analyst behavior predicts that analysts immediately and without bias incorporate information into their forecasts. Several studies document analysts' tendency to systematically underreact to information and are inconsistent with rationality. Other studies indicate that analysts systematically overreact to new information or that they are systematically optimistic. This study discriminates between these three hypotheses by examining the interaction between the nature of information and the type of reaction by analysts. The evidence indicates that analysts underreact to negative information, but overreact to positive information. These results are consistent with systematic optimism in response to information.
Author: Susan Marie Young
Publisher:
ISBN:
Category :
Languages : en
Pages : 214
Get Book Here
Book Description
Author: Andrew Stotz
Publisher:
ISBN:
Category :
Languages : en
Pages : 122
Get Book Here
Book Description
Over the past 12 years, financial analysts across the world have been optimistically wrong with their 12-month earnings forecasts by 25.3%. This study may be the first of its kind to assess analyst earnings forecast accuracy at all listed companies across the globe, covering 70 countries. A review of prior research shows little uniformity in the preparation of the data set, yet differences in how outliers are treated, for example, can create substantially different results. This research lays out six specific steps to prepare the data set before any analysis is done.Three main conclusions come from this research: First, analyst earnings forecasts globally were 25.3% optimistically wrong, meaning on average, analysts started each year forecasting company profits of US$125, but 12 months later that company reported profits of US$100. Second, analysts had a harder time forecasting earnings for companies in emerging markets, where they were 35% optimistically wrong. Third, that analyst optimism mainly occurred when the companies they forecasted experienced very low levels of actual earnings growth, analysts did not make an equal, but opposite error for fast growth companies.
Author: Marius Rombach
Publisher: GRIN Verlag
ISBN: 3656040443
Category : Computers
Languages : en
Pages : 25
Get Book Here
Book Description
Seminar paper from the year 2011 in the subject Computer Science - Commercial Information Technology, University of Freiburg (Chair of Information Systems Research), language: English, abstract: Earnings press releases are the major news event of the season for companies and investors, analysts, financial media and the market. As framework of investor relations (IR) they communicate the financial performance in numerical and narrative forms. For example, earnings press releases are obligatory for firms listed on the New York Stock Exchange (NYSE). There are several rules and guidelines how to prepare them. An accurate earnings press release contains, apart from analyses of operating results, historical data, positive and negative factors affecting key financial indicators, a realistic and truthful forecast of future quarters. Whereas numerous studies focus on interpretation of numerical forms in earnings press releases, this paper examines the influence of optimistic and pessimistic language in earnings press releases on future firm performance with several studies. It also opposes different approaches to measure the tone. Based on the study "Beyond the Numbers: An Analysis of Optimistic and Pessimistic Language in Earnings Press Releases" published by Davis, Piger and Sedor the paper presents a textual analysis approach with DICTION 5.0. The authors have been the first scientists so far to examine the role language plays in the credible communication of information to investors. The dictionary-based content analysis program DICTION 5.0 is able to identify subtle aspects of language. The systematic textual analysis techniques are based on pre-existing search rules. It is able to analyze a larger sample size than possible by human coding or manual reading. Apart from this, statistical methods - like the naïve Bayesian learning algorithm, reducing a given sentence to a list of words - are introduced and compared with each other. Given the different approaches to analy
Author: Anna M. Cianci
Publisher:
ISBN:
Category : Investment advisors
Languages : en
Pages : 250
Get Book Here
Book Description
Author: Steven Lustgarten
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
In this study we test whether financial analysts' use their earnings forecasts to make stock recommendations. We hypothesize that if analysts use earnings forecasts as a basis for stock recommendations, the likelihood of a buy (sell) recommendation ought to increase (decrease) when the analyst's earnings forecast becomes more optimistic (pessimistic) relative to the market's expectation. The data supports this hypothesis. We also test the extent to which analysts' stock recommendations are based on public and/or on private earnings information. Private information is measured as the difference between the analysts own earnings forecast and the consensus forecasts of other analysts. Public information is measured as the difference between the consensus forecast and the random walk forecast. Our data show that stock recommendations are related to both private and public earnings information, private information is more important. We also find that the relationship between recommendations and forecasts is stronger where earnings are more value relevant. Factors such as higher earnings persistence and growth opportunities, lower market risk and larger firm size make stock recommendations more responsive to earnings forecasts. Stock recommendations are related to forecasted earnings surprises even when the forecast revision is held constant.
Author: Sundaresh Ramnath
Publisher: Now Publishers Inc
ISBN: 1601981627
Category : Business & Economics
Languages : en
Pages : 125
Get Book Here
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: Peter D. Easton
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Get Book Here
Book Description
Recent literature has used analysts' earnings forecasts, which are known to be optimistic, to estimate implied expected rates of return; yielding upwardly biased estimates. We estimate that the bias, computed as the difference between the estimates of the implied expected rate of return based on analysts' earnings forecasts and estimates based on current earnings realizations, is 2.84 percent. The importance of this bias is illustrated by the fact that several extant studies estimate an equity premium in the vicinity of 3 percent, which would be eliminated by the removal of the bias. We illustrate the point that cross-sample differences in the bias may lead to the erroneous conclusion that cost of capital differs across these samples by showing that analysts' optimism and, hence, bias in the implied estimates of the expected rate of return, differs with firm size and with analysts' recommendation. As an important aside, we show that the bias in a value-weighted estimate of the implied equity premium is 1.60 percent and that the unbiased value-weighted estimate of this premium is 4.43 percent.
Author: John C. Easterwood
Publisher:
ISBN:
Category : Investment advisors
Languages : en
Pages : 66
Get Book Here
Book Description
