Over-reactions in Analysts' Long-term Earnings Growth Forecasts and Their Implications for Market Anomalies PDF Download
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Author: Aili Li
Publisher:
ISBN:
Category :
Languages : en
Pages : 428
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Book Description
Author: Aili Li
Publisher:
ISBN:
Category :
Languages : en
Pages : 428
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Book Description
Author: Bennett Salvatora
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
The following study analyzes the accuracy and bias of sell-side equity analyst's long-term earnings per share growth forecasts. Having a firm understanding of the accuracy of analyst's long-term earnings per share estimates is vital for any professionals using such forecasts when performing financial valuation, estimating cost of capital, and making investment decisions. By comparing long-term earnings per share growth rate estimates to actual earnings per share growth rates observed, both the accuracy and bias of forecasts were evaluated.Specifically, this study was focused on discovering whether analysts' estimates have improved over time. Even with the implementation of recent regulatory reforms aimed to improve the bias and inaccuracy of analyst forecasts, this study found no significant evidence that such changes have been helpful in improving the accuracy or continued upward bias that exists in long-term earnings per share growth rate estimates. Recognition of this persistent bias and inaccuracy of long-term earnings per share growth rate estimates is vital for all market participants to understand and take into consideration in order to make prudent investment decisions.
Author: Jeehong Kim
Publisher:
ISBN:
Category : Stock price forecasting
Languages : en
Pages : 386
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Author: Boochun Jung
Publisher:
ISBN:
Category :
Languages : en
Pages : 49
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Book Description
Prior literature refers to economic incentives to generate investment banking business and trading commissions as explanations for analyst publication of forecasts of firms' long-term earnings growth (LTG). Prior research also documents wildly optimistic LTG forecasts and a negative relation between LTG forecasts and subsequent excess returns. Thus, the literature portrays analysts' LTG forecasts as nonsensical from a valuation perspective. We introduce and investigate a new perspective on the value-relevance of analyst publication of LTG forecasts. We hypothesize that analysts issuing LTG forecasts signal relatively high effort and ability in developing perspective of the subject firms' long-term prospects. Consistent with this hypothesis, we find that the stock market responds more strongly to the stock recommendation revisions of analysts who publish accompanying LTG forecasts. In addition, we hypothesize and find that analysts issuing LTG forecasts are less likely to leave the profession or move to smaller brokerage houses. Consistent with Reg. FD's intention to restrict analyst access to insider information and promote fundamental analysis of the valuation implications of firms' long-term prospects, we find that post-Reg. FD observations drive most of our results. Overall, we identify previously undocumented benefits accruing to analysts who publish LTG forecasts.
Author: Steven Alan Sharpe
Publisher:
ISBN:
Category : Economic forecasting
Languages : en
Pages : 40
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Author: Steven Alan Sharpe
Publisher:
ISBN:
Category : Stock price forecasting
Languages : en
Pages : 58
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Author: Gregory Alan Sommers
Publisher:
ISBN:
Category :
Languages : en
Pages : 194
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Book Description
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: Jeffery Abarbanell
Publisher:
ISBN:
Category : Stocks
Languages : en
Pages : 50
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Book Description
Author: Yasuyuki Fuchita
Publisher: Brookings Institution Press
ISBN: 0815729820
Category : Business & Economics
Languages : en
Pages : 216
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Book Description
A Brookings Institution Press and Nomura Institute of Capital Markets Research publication Developed country capital markets have devised a set of institutions and actors to help provide investors with timely and accurate information they need to make informed investment decisions. These actors have become known as "financial gatekeepers" and include auditors, financial analysts, and credit rating agencies. Corporate financial reporting scandals in the United States and elsewhere in recent years, however, have called into question the sufficiency of the legal framework governing these gatekeepers. Policymakers have since responded by imposing a series of new obligations, restrictions, and punishments—all with the purpose of strengthening investor confidence in these important actors. Financial Gatekeepers provides an in-depth look at these new frameworks, especially in the United States and Japan. How have they worked? Are further refinements appropriate? These are among the questions addressed in this timely and important volume. Contributors include Leslie Boni (University of New Mexico), Barry Bosworth (Brookings Institution), Tomoo Inoue (Seikei University), Zoe-Vonna Palmrose (University of Southern California), Frank Partnoy (University of San Diego School of Law), George Perry (Brookings Institution), Justin Pettit (UBS), Paul Stevens (Investment Company Institute), Peter Wallison (American Enterprise Institute).
Author: Augustin Landier
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
We analyze firm-level analyst forecasts during the COVID crisis. First, we describe expectations dynamics about future corporate earnings. Downward revisions have been sharp, mostly focused on 2020, 2021 and 2022, but much less drastic than the lower bound estimated by Gormsen and Koijen (2020). Analyst forecasts do not exhibit evidence of over-reaction: As of mid-May, forecasts over 2020 earnings have progressively been reduced by 16%. Longer-run forecasts, as well as expected "Long-Term Growth" have reacted much less than short-run forecasts, and feature less disagreement. Second, we ask how much discount rate changes explain market dynamics, in an exercise similar to Shiller (1981). Given forecast revisions and price movements, we estimate an implicit discount rate going from 10% in mid-February, to 13% at the end of March, back down to their initial level in mid-May. We then decompose discount rate changes into three factors: changes in unlevered asset risk premium (0%), increased leverage (+1%) and interest rate reduction (-1%). Overall, analyst forecast revisions explain all of the decrease in equity values between January 2020 and mid May 2020, but they do not explain shorter term movements.
