Analyst Forecast Dispersion And Future Stock Return Volatility
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Analyst Forecast Dispersion And Future Stock Return Volatility
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Author : Madhu Kalimipalli
language : en
Publisher:
Release Date : 2006
Analyst Forecast Dispersion And Future Stock Return Volatility written by Madhu Kalimipalli and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with categories.
In this paper, we examine the relationship between analysts' forecast dispersion and future stock return volatility using monthly data for a cross section of 160 US firms from 1981 to 1996. We find that there is a strong and positive relationship between analysts' forecast dispersion and future return volatility. The dispersion measure has incremental information content even after accounting for market volatility. These results are robust across sub-sample periods and sub-samples based on based on number of analysts following a firm, forecast dispersion and market capitalization. There is also a strong seasonal relationship between the dispersion measure and future volatility. The importance of dispersion on future return volatility is high in January and the first few months of the year, and declines thereafter. Such information content of analysts' earnings forecast dispersion is of great importance for active portfolio management, option pricing and arbitrage trading strategies.
Analysts Forecasts And Future Stock Return Volatility
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Author : Yaowen Shan
language : en
Publisher:
Release Date : 2006
Analysts Forecasts And Future Stock Return Volatility written by Yaowen Shan and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with Stock price forecasting categories.
Further Evidence On The Relation Between Analysts Forecast Dispersion And Stock Returns
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Author : Orie E. Barron
language : en
Publisher:
Release Date : 2008
Further Evidence On The Relation Between Analysts Forecast Dispersion And Stock Returns written by Orie E. Barron and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.
Prior research reports seemingly conflicting evidence and interpretations concerning the relation between dispersion in analysts' earnings forecasts and stock returns. Diether et al. (2002) and Johnson (2004) find a negative relation between levels of dispersion in analysts' forecasts and future stock returns. Yet, changes in forecast dispersion are negatively associated with contemporaneous stock returns (L'Her and Suret 1996). We demonstrate that levels and changes in dispersion reflect different theoretical constructs. Changes in dispersion primarily reflect changes in information asymmetry whereas levels of dispersion primarily reflect levels of uncertainty. Further, the uncertainty component of dispersion levels reflects idiosyncratic risk that is negatively associated with future stock returns. These findings provide support for Johnson's (2004) explanation that dispersion levels reflect idiosyncratic uncertainty that increases the option value of the firm and generally refute Diether et al.'s (2002) explanation that dispersion levels reflect information asymmetry.In addition, we reconcile L'Her and Suret's (1996) findings with the findings of Johnson (2004). We find that the negative association between changes in dispersion and contemporaneous stock returns is not due to increased uncertainty but rather increased information asymmetry.
The Role Of Other Information In Analysts Forecasts In Understanding Stock Return Volatility
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Author : Yaowen Shan
language : en
Publisher:
Release Date : 2018
The Role Of Other Information In Analysts Forecasts In Understanding Stock Return Volatility written by Yaowen Shan and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
This study proposes and validates ldquo;other informationrdquo; in analysts' forecasts as a legitimate proxy for future cash flows, and examines its incremental role in explaining stock return volatility. We suggest that ldquo;other informationrdquo; contains information about fundamentals beyond that reflected in current financial statements, and reflects firms' fundamentals on a more timely basis than dividends or earnings. The link between ldquo;other informationrdquo; and volatility can be derived from a combination of the accounting version of the Campbell-Shiller model (Campbell and Shiller 1988a, 1988b; Vuolteenaho 2002) and Ohlson's (1995) linear information dynamics. Using standardized regressions we find volatility increases when current ldquo;other informationrdquo; is more uncertain, and increases more in response to unfavorable news compared to favorable news. Variance decomposition analysis shows that the variance contribution of ldquo;other informationrdquo; dominates that of expected-return news. The incremental role of ldquo;other informationrdquo; is at least half of the effect of earnings in explaining future volatility. The results are valid for measures of both systematic and idiosyncratic volatility, and are more pronounced for firms with poor information environments. Overall, our results highlight the importance of including ldquo;other informationrdquo; as an additional cash-flow proxy in future studies of stock prices and volatility.
Analysts Forecast Dispersion And Stock Split Announcements
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Author : Maria Chiara Iannino
language : en
Publisher:
Release Date : 2016
Analysts Forecast Dispersion And Stock Split Announcements written by Maria Chiara Iannino and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
This paper is an empirical investigation of the relation between the dispersion on analysts' earnings forecasts and the future performance following a change in the nominal price of shares. On a sample of US splits occurred from 1993 to 2013, we observe a change in the distribution of analysts' forecasts after the announcement of the event. In particular, we observe an increase in forecasts' dispersion. We distinguish the two components of private and common information, and we find that asymmetric information significantly increases after the announcement of stock splits, while no change is evinced in uncertainty. While we do not observe any relationship between dispersion and future returns in our sample of stocks, we shed light on the literature on disagreement observing a negative relation between asymmetric information and both future returns and cumulative abnormal returns post-split. We conclude observing that stock splits have a stronger positive effect on future performance for shares with lower prior asymmetric information.
Analysts Forecast Dispersion And Stock Market Anomalies
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Author : Tingting Liu
language : en
Publisher:
Release Date : 2020
Analysts Forecast Dispersion And Stock Market Anomalies written by Tingting Liu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
We show that understanding the role of analysts' forecast bias is central to discovering the behavior that causes some stocks to have high analyst forecast dispersion. This finding is important because stocks with high analyst forecast dispersion contribute significantly to many important anomalies. We first explain how forecast bias produces significant negative future returns in the high dispersion portfolio. Next we examine the effect of these stocks on momentum returns, the profitability anomaly, and post-earnings announcement drift. Finally, we examine the performance of four asset pricing models focusing on the model's ability to explain the returns to these high dispersion stocks.
The Relation Between Dispersion In Analysts Forecasts And Stock Returns
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Author : Shuping Chen
language : en
Publisher:
Release Date : 2016
The Relation Between Dispersion In Analysts Forecasts And Stock Returns written by Shuping Chen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
This paper investigates the conclusion in Diether, Malloy, and Scherbina (2002) that dispersion in analysts' forecasts proxies for differences in investor beliefs, and that prices reflect the beliefs of optimistic investors when dispersion is high. If this is the case, we expect to find higher earnings response coefficients (ERCs), related to negative earnings surprises, for high versus low dispersion firms. This follows because the negative earnings surprises are less consistent with the beliefs of optimists. However, we find smaller ERCs, which calls into question the optimism argument in DMS. Further, we find that the relatively low future returns earned by high forecast dispersion firms, documented in DMS, are explained by the well known post-earnings-announcement drift phenomena. Specifically, after sorting observations based on prior period standardized unexpected earnings (SUEs), which are associated with drift, the difference between the future returns of high versus low dispersion firms is not statistically significant.
Analyst Forecasts And Stock Returns
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Author : James S. Ang
language : en
Publisher:
Release Date : 2001
Analyst Forecasts And Stock Returns written by James S. Ang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2001 with categories.
This study seeks to determine the relation between stock returns and analyst forecast properties, specifically, the dispersion and error of annual earnings forecasts. The results of portfolio sorts, Fama-MacBeth cross-sectional regression models, and Fama and French (1993) factor models indicate firms with low dispersion or error outperform firms with high dispersion or error. Robustness tests show the results are not explained by liquidity, momentum, industry, post-earnings announcement drift, or traditional risk measures. An investment strategy based on forecast properties is shown to produce zero-cost returns of 13% per year, yielding positive returns in all 19 years using an error measure. The results are not attributable to several potential theories. Risk-related theories are eliminated as firms with low dispersion or error (quot;transparentquot;) outperform firms with high dispersion or error (quot;opaquequot;). This remains true even after controlling for volatility measures. Behavioral theories based on optimism are also eliminated as optimistic forecasts only explain a small part of the results. Finally, the results are not related to contrarian-value strategies as the transparent firms outperform in both up and down markets.
Credit Line Undrawn Spreads And The Predictability Of Stock Returns
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Author : Lifeng Gu
language : en
Publisher:
Release Date : 2019
Credit Line Undrawn Spreads And The Predictability Of Stock Returns written by Lifeng Gu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
This paper documents a new high risk-low return puzzle. Specfically, we find that a forward-looking risk measure extracted from credit line undrawn spreads negatively predicts borrowers' future stock returns. This negative risk-return relation is separate from previously documented asset pricing puzzles related to idiosyncratic volatility, analyst forecast dispersion, and credit risk. A long-short strategy based on this finding generates a significant alpha of over 7% per annum.
Dispersion In Analyst Forecasts And The Profitability Of Earnings Momentum Strategies
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Author : Andreas P. Dische
language : en
Publisher:
Release Date : 2002
Dispersion In Analyst Forecasts And The Profitability Of Earnings Momentum Strategies written by Andreas P. Dische and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002 with categories.
It is a well documented phenomenon that stock prices underreact to news about future earnings and drift in the direction suggested by revisions in analysts' earnings forecasts. This paper shows that the dispersion in analysts' consensus forecasts contains incremental information to predict future stock returns. Higher abnormal returns can be achieved by applying an earnings momentum strategy to stocks with a low dispersion. This finding supports one of the recent behavioral models in which investors focus too little on the weight of new evidence and conservatively update their beliefs in the right direction, but by too little in magnitude with respect to more objective information.