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Author: Xuan Wang
Publisher:
ISBN: 9781085656627
Category : Electronic dissertations
Languages : en
Pages : 90
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Book Description
This dissertation explores the informational role of sell-side analysts' change in forecasting horizon. I find that portfolios formed by buying stocks with large increase in analyst horizon and shorting stocks with large decrease in analyst horizon generate superior future return. Horizon change has information incremental to analyst earnings forecast and recommendation revisions, as well as firm fundamentals. Large increase in horizon mainly drives the result. I find that analysts who contribute to strong horizon increase are associated with higher forecast accuracy. This increase is likely associated with the career concerns of inexperienced analysts. The return predictability associated with analyst forecast horizon change exists in the information environment of high liquidity and low volatility, at the times when analyst forecasts are the most accurate. Moreover, analyst forecast horizon is partially related to analysts' profitability prediction and firm risk assessment, although the horizon change, the component predictable by firm fundamentals notwithstanding, is still able to predict return in the short-run. Overall, the findings reported in this dissertation support the view that sell-side analysts are important rational-information providers in the financial industry.
Author: Xuan Wang
Publisher:
ISBN: 9781085656627
Category : Electronic dissertations
Languages : en
Pages : 90
Get Book Here
Book Description
This dissertation explores the informational role of sell-side analysts' change in forecasting horizon. I find that portfolios formed by buying stocks with large increase in analyst horizon and shorting stocks with large decrease in analyst horizon generate superior future return. Horizon change has information incremental to analyst earnings forecast and recommendation revisions, as well as firm fundamentals. Large increase in horizon mainly drives the result. I find that analysts who contribute to strong horizon increase are associated with higher forecast accuracy. This increase is likely associated with the career concerns of inexperienced analysts. The return predictability associated with analyst forecast horizon change exists in the information environment of high liquidity and low volatility, at the times when analyst forecasts are the most accurate. Moreover, analyst forecast horizon is partially related to analysts' profitability prediction and firm risk assessment, although the horizon change, the component predictable by firm fundamentals notwithstanding, is still able to predict return in the short-run. Overall, the findings reported in this dissertation support the view that sell-side analysts are important rational-information providers in the financial industry.
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: Jared N. Jennings
Publisher:
ISBN:
Category :
Languages : en
Pages : 47
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Book Description
Prior research calls into question the general informational role of analysts by documenting inefficiencies, biases, and limitations of sell-side analyst research (e.g., forecasts). Rather than examine the general informational value of analyst research, I examine the value of analyst research in a specific setting - shareholder lawsuits - when investors demand information but other information providers are limited in their ability to provide it. After the filing of a shareholder lawsuit, the demand for and production of management provided information decreases. I argue that analysts are uniquely qualified to provide a portion of the information demanded by investors after the filing of the lawsuit. I find evidence consistent with analysts providing more research that is more informative after the lawsuit's filing. I also find evidence that investors are more likely to demand information from analysts when the severity of the lawsuit is greater. This study provides contrasting evidence to the literature that is critical of analysts by documenting that analysts are able to produce useful information when investors demand it, despite a potential reduction in the demand for or production of management-provided information. In addition, this paper provides insights on how one facet of the firm's information environment changes after the filing of the lawsuit, which is useful in developing a more complete picture of how class action lawsuits impact the information environment.
Author: Sang-Mook Lee
Publisher:
ISBN:
Category :
Languages : en
Pages : 98
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Book Description
Broadly, this study focuses on roles of sell-side analysts and examines the determinants and consequences of information discovery and stock timing roles by sell-side analysts. We also re-examine reiterations of prior recommendations by sell-side analysts. In Chapter 1, the contribution is to document that analysts add value by engaging in discovery of private information and this value addition is greater than that due to interpretation of public news or stock timing. The innovation in this Chapter is to read over 3,700 analyst reports from Investext and explicitly identify whether the report contains discovery, interpretation, and/or timing. Analysts discover new information by talking to management sources (personal meetings, investor meetings, and conference calls) or non-management sources (such as channel checks). We find that information discovery is prevalent in 17% of the reports. The cumulative abnormal return (CAR) for reports containing discovery are 6.3% for upgrades and -10.6% for downgrades. The CARs are higher for reports containing discovery relative to those containing interpretation or timing. We find that economic determinants predict whether a report will contain discovery. Discovery from management sources is more likely for reports in the pre-Reg FD period and for reports by optimistic analysts. Discovery from non-management sources is more likely for reports written by All-Star analysts, and for firms that have high information asymmetry and those that are followed by more analysts. In Chapter 2, the contribution is to introduce and document a third role that analysts play that is also valuable to investors, which we term "stock timing." Specifically, we define a timing report as one where the analyst revises his recommendation but does not revise the Price Target or any of the 23 fundamental drivers of stock price (such as EPS, FCF) tracked by I/B/E/S. Because the analyst maintains the same price target as in his prior report but still revises his recommendation, such timing calls are contrarian valuation calls. Analysts issue timing downgrades (upgrades) in response to price increases (declines) since the release of their prior report on the firm. 30% of all revisions are timing reports, indicating the importance of the timing role played by analysts. If analysts have timing ability, then markets should react to the release of the timing report and we should observe that economic determinants explain the cross-sectional variation in timing ability. We find the 3-day announcement return is over 2% in magnitude, 62% of the reports are winners (have announcement returns that have the correct sign), 10% of the reports are large enough to be considered influential, and 37% of the reports are persistent winners. These results suggest that analysts have timing ability. The ability to time is similar is magnitude to information interpretation but smaller compared to information discovery. We find considerable cross-sectional and time-series variation in timing ability. We find that the probability of issuing a timing report is positively related to the opportunities to time the stock provided by potential mispricing. Conditional on issuing a timing report, the probability of issuing a winner, an influential winner, or a persistent winner is positively related to analyst experience and negatively related to the costs associated with issuing a timing report. In Chapter 3, we document that recommendation reiterations are not homogeneous and there is a large subset of reiterations that are as much valued by investors as recommendation revisions. We combine Detail History file containing the measures tracked by I/B/E/S (Price Target, EPS, etc.) and Recommendation file to create the full time series of recommendations (initiations, reiterations, and revisions) made by each analyst for each firm for 14 years from 1999 to 2012. By adopting a modified version of "filling in the holes" method, we find that recommendation reiterations are prevalent, consisting of about 80% of recommendations for our 14-year sample period. Second, market response to recommendation reiterations increases monotonically from Reiteration: Strong Sell to Reiteration: Strong Buy. Third, reiterations coupled with contemporary changes in price targets and/or earning forecasts bring substantial absolute abnormal stock returns to investors. Lastly, when we replicate what Loh and Stulz (2011), we find that the number of reiterations which are influential is more than twice that of recommendation revisions that are influential.
Author: Sati P. Bandyopadhyay
Publisher:
ISBN:
Category :
Languages : en
Pages : 17
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Book Description
Little attention has been paid to a principal decision context in which analysts' earnings forecasts are prepared, namely, as an input to their recommendations. We use two data sets, Value Line, USA, and Research Evaluation Service, Canada, and examine the importance of analysts' earnings forecasts for their stock price forecasts via three hypotheses: (1) analysts' earnings forecasts are important for their stock price forecasts; (2) analysts' long-term earnings forecasts are more important than their short-term earnings forecasts for their predictions of stock prices over a particular stock price forecast horizon; (3) the importance of analysts' earnings forecasts for their stock price forecasts rises as the joint earnings and stock price forecast horizon increases. We show that: (1) when the earnings forecast horizon is the next fiscal year, forecasted earnings explain only 30% of the variation in forecasted price; (2) the importance of forecasted earnings for forecasted price rises as the earnings forecast horizon increases; (3) in the long run, (i.e. three to five years hence), forecasted earnings explain about 60% of the variation in forecasted price. Decision usefulness is an ex ante concept, but tests regarding the usefulness of earnings for stock price generally have used actual (not expectational) data. Our evidence suggests that earnings expectations are decision useful, where the decision context is sell-side analysts' stock price forecasts. Our results are potentially important to users of sell-side analyst research reports. When a stock recommendation is accompanied only by short-run earnings forecasts, investors need to closely examine estimates of non-earnings variables to assess the quality of stock recommendations. In contrast, when stock recommendations are accompanied by both short-run and long-run earnings forecasts, investors need to examine estimates of non-earnings information variables less closely.
Author: Niklas Blümke
Publisher:
ISBN:
Category :
Languages : en
Pages : 37
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Book Description
We introduce a novel framework to predict the relative accuracy of sell-side analysts' annual earnings forecasts out-of-sample. Prior studies only evaluate forecasts shortly before the corresponding earnings release. In contrast, our study is the first to provide long-term predictions which are of particular value for both investors and academics. Overall, we show that analysts classified as superior outperform their inferior counterparts by 8.4 percent, on average. The prediction performance is even more pronounced for longer-term forecasts and for firms with high dispersion of analysts' forecasts, that is, when the identification of superior forecasts matters most. Moreover, we challenge the conclusion of existing literature that characteristics reflecting an analyst's skill set are not helpful to obtain better predictions. In particular, when evaluating forecasts which draw on similar information sets, we find that a model based on analyst characteristics outperforms a model focusing simply on the forecast horizon, for example.
Author: Boris Groysberg
Publisher: Stanford University Press
ISBN: 0804787123
Category : Business & Economics
Languages : en
Pages : 200
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Book Description
Wall Street Research: Past, Present, and Future provides a timely account of the dramatic evolution of Wall Street research, examining its rise, fall, and reemergence. Despite regulatory, technological, and global forces that have transformed equity research in the last ten years, the industry has proven to be remarkably resilient and consistent. Boris Groysberg and Paul M. Healy get to the heart of Wall Street research—the analysts engaged in the process—and demonstrate how the analysts' roles have evolved, what drives their performance today, and how they stack up against their buy-side counterparts. The book unpacks key trends and describes how different firms have coped with shifting pressures. It concludes with an assessment of where equity research is headed in emerging markets, drawing conclusions about this often overlooked corner of Wall Street and the industry's future challenges.
Author: James Valentine
Publisher: McGraw Hill Professional
ISBN: 0071736395
Category : Business & Economics
Languages : en
Pages : 465
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Book Description
The first real-world guide for training equity research analysts—from a Morgan Stanley veteran Addresses the dearth of practical training materials for research analysts in the U.S. and globally Valentine managed a department of 70 analysts and 100 associates at Morgan Stanley and developed new programs for over 500 employees around the globe He will promote the book through his company's extensive outreach capabilities
Author: Malwina Woznik
Publisher: GRIN Verlag
ISBN: 3656478236
Category : Business & Economics
Languages : en
Pages : 38
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Book Description
Seminar paper from the year 2011 in the subject Business economics - Controlling, grade: 1,3, University of Cologne (Seminar für allgemeine BWL und Controlling), language: English, abstract: Since the beginning of the 90s research on issues referring to analysts’ practise grew rapidly to such an extent that even several publications are concerned with giving an overview of this development. Besides the principal-agent problematic between the firm’s managers and the equity investors, investors are dependent on analysts’ information in times where equity trading soared and the trading turnover in 2008 was 35 times higher than in 1980. That is why shareholders are not able to analyse the amount of information regarding a company due to lack of time or ability. Therefore analysts advise investors to make a profitable decision by publishing a report including for instance stock recommendations or earnings forecasts. Another reason why there is so much research about analysts’ practise is the fact that their information influences investors’ trading behaviour. Thus, it is crucial to know how reliable those statements are and accordingly to be able to assess the quality of the outputs. However, to answer the question of analysts’ process of transforming various information of stock recommendations have to be examined in detail. Recent investigations rather focus on the single properties of analysts’ analyses as earnings forecasts and stock recommendations, but did not connect those two values. Prior studies deal with research questions like the effect of earnings forecasts on the stock prices or the use of stock recommendations to foretell abnormal return. Bradshaw (2004) is the first research paper which follows the question whether there is a link and if so how analysts incorporate the earnings forecasts into their stock recommendation. Because of the importance of Bradshaw (2004), this paper reviews the main issues and embeds them into the existing literature concerning the role of analysts. The rest of this paper is organized as follows. The first chapter focuses on the character of analysts and potential key input factors which might be used by analysts for issuing recommendations. Then a brief review of Bradshaw (2004) is given to present the main results. This enables a discussion about potential and realized extensions in literature which follows in the third chapter. The final chapter concludes.
Author: Oscar Anselm Stolper
Publisher:
ISBN:
Category :
Languages : en
Pages : 29
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Book Description
In order to fulfill their function as information intermediaries in capital markets, sell-side equity analysts regularly issue updated forecasts on the stocks they cover. Quite often, the publication of (revised) analysts' reports is subject to certain trigger events such as the publication of annual figures or the announcement of an upcoming merger. In this exploratory study, we develop a two-step procedure to identify the core events that trigger the release of analysts' reports on companies that constitute the Dow Jones EuroSTOXX50 index during the three-year period from 2004 to 2006. These can be grouped into Financial Disclosures, Corporate Management, Corporate Strategy, Business Activity, Operating Environment and Share. The results suggest that sell-side analysts attach great importance to non-financial information events when transforming their earnings estimates into valuation forecasts and stock recommendations. Additionally, we link the information events identified as reasons of issuance to the summary measures disclosed in the reports in order to investigate the relationship between the report trigger and associated analyst reaction. Our findings indicate that the forecasting activity of sell-side analysts is greatly influenced by forward-looking statements made by management, strategy-related news flow, and non-company-specific information relating to the covered firm's operating environment.
