Analyst Forecasts And The Cross Section Of European Stock Returns
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Analyst Forecasts And The Cross Section Of European Stock Returns
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Author : Steven K. Todd
language : en
Publisher:
Release Date : 2005
Analyst Forecasts And The Cross Section Of European Stock Returns written by Steven K. Todd and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005 with categories.
We examine revisions to earnings forecasts by equity analysts and their role in predicting stock returns. We provide evidence that European stocks with net upward revised forecasts earn higher future returns than otherwise similar stocks. This effect is not concentrated in small stocks, stocks with low analyst coverage, or stocks with low book-to-market ratios. We find differences in the return continuation patterns of stocks with upward versus downward revisions, namely, bad news travels quickly, but good news travels slowly. This result is consistent with investors' attaching greater significance to poor earnings forecasts, but adopting a wait-and-see approach to good news.
Analyst Earnings Forecasts And The Cross Section Of Stock Returns
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Author : Grawehr Louis-Emmanuel
language : en
Publisher:
Release Date : 2016
Analyst Earnings Forecasts And The Cross Section Of Stock Returns written by Grawehr Louis-Emmanuel 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 thesis analyzes the ability of a value-to-price ratio (V/P) to predict the cross-section of European stock returns, where V is based on the residual income valuation model using analysts' consensus earnings estimates from I/B/E/S. The V/P ratio is designed to identify stocks where market expectations of earnings are not accurately impounded into prices. For the constituents of the Stoxx Europe 600 index in the years 2002-2014, I test whether a self-financing portfolio taking a long position in the top quintile of V/P and a short position in the bottom quintile of V/P generates abnormal returns. I find that this strategy does not exhibit a statistically significant positive alpha in the context of standard asset pricing models. I argue that stock prices reflect analyst forecasts more accurately and more quickly than before, leading to the unprofitability of the strategy. The strategy does however have a positive and significant exposure to the Quality-Minus-Junk factor proposed by Asness, Frazzini and Pedersen (2014). Indeed, the V/P ratio is positively related to a self-constructed quality index incorporating the dimensions profitability, growth, safety and payout. This suggests that returns from picking stocks where market earnings expectations are not accurately reflected in prices are in large part driven by their quality characteristics.
The Role Of Beta And Size In The Cross Section Of European Stock Returns
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Author : Steven L. Heston
language : en
Publisher:
Release Date : 2008
The Role Of Beta And Size In The Cross Section Of European Stock Returns written by Steven L. Heston 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.
This paper examines the ability of beta and size to explain cross-sectional variation in average returns in twelve European countries. We find that average stock returns are positively related to beta and negatively related to firm size. The beta premium is in part due to the fact that high beta countries outperform low beta countries. Within countries high beta stocks outperform low beta stocks only in January, not in other months. We reject the hypothesis that differences in average returns on size- and beta-sorted portfolios can be explained by market risk and exposure to the excess return of small over large stocks (SMB). Consistent with recent U.S. evidence, we find that after controlling for size, there is no association between average returns and exposure to SMB.
Expectations In The Cross Section
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Author : Johnathan Loudis
language : en
Publisher:
Release Date : 2019
Expectations In The Cross Section written by Johnathan Loudis 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 provides evidence that the market does not efficiently incorporate expected returns implied by analyst price targets into prices. I use a novel decomposition to extract information and bias components from these analyst-expected returns and develop an asset pricing framework that helps interpret price reactions to each component. A one-standard-deviation increase in the information (bias) component is associated with a five (one) percentage point increase in announcement-month returns. The positive reaction to bias implies the market does not fully debias analyst-expected returns before incorporating them into prices. Prices overreact to bias and reverse their initial reaction within three to six months. Prices underreact to information and returns drift an additional one percentage point beyond their initial reaction in the following 12 months. Announcement-window returns forecast future returns, which provides model-free evidence of underreaction, and that underreaction dominates overreaction. Trading against underreaction generates average monthly returns of 1.12% with a Sharpe ratio of 1.08, and the returns survive controlling for exposure to many standard factors.
Empirical Asset Pricing
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Author : Turan G. Bali
language : en
Publisher: John Wiley & Sons
Release Date : 2016-02-26
Empirical Asset Pricing written by Turan G. Bali and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-02-26 with Business & Economics categories.
“Bali, Engle, and Murray have produced a highly accessible introduction to the techniques and evidence of modern empirical asset pricing. This book should be read and absorbed by every serious student of the field, academic and professional.” Eugene Fama, Robert R. McCormick Distinguished Service Professor of Finance, University of Chicago and 2013 Nobel Laureate in Economic Sciences “The empirical analysis of the cross-section of stock returns is a monumental achievement of half a century of finance research. Both the established facts and the methods used to discover them have subtle complexities that can mislead casual observers and novice researchers. Bali, Engle, and Murray’s clear and careful guide to these issues provides a firm foundation for future discoveries.” John Campbell, Morton L. and Carole S. Olshan Professor of Economics, Harvard University “Bali, Engle, and Murray provide clear and accessible descriptions of many of the most important empirical techniques and results in asset pricing.” Kenneth R. French, Roth Family Distinguished Professor of Finance, Tuck School of Business, Dartmouth College “This exciting new book presents a thorough review of what we know about the cross-section of stock returns. Given its comprehensive nature, systematic approach, and easy-to-understand language, the book is a valuable resource for any introductory PhD class in empirical asset pricing.” Lubos Pastor, Charles P. McQuaid Professor of Finance, University of Chicago Empirical Asset Pricing: The Cross Section of Stock Returns is a comprehensive overview of the most important findings of empirical asset pricing research. The book begins with thorough expositions of the most prevalent econometric techniques with in-depth discussions of the implementation and interpretation of results illustrated through detailed examples. The second half of the book applies these techniques to demonstrate the most salient patterns observed in stock returns. The phenomena documented form the basis for a range of investment strategies as well as the foundations of contemporary empirical asset pricing research. Empirical Asset Pricing: The Cross Section of Stock Returns also includes: Discussions on the driving forces behind the patterns observed in the stock market An extensive set of results that serve as a reference for practitioners and academics alike Numerous references to both contemporary and foundational research articles Empirical Asset Pricing: The Cross Section of Stock Returns is an ideal textbook for graduate-level courses in asset pricing and portfolio management. The book is also an indispensable reference for researchers and practitioners in finance and economics. Turan G. Bali, PhD, is the Robert Parker Chair Professor of Finance in the McDonough School of Business at Georgetown University. The recipient of the 2014 Jack Treynor prize, he is the coauthor of Mathematical Methods for Finance: Tools for Asset and Risk Management, also published by Wiley. Robert F. Engle, PhD, is the Michael Armellino Professor of Finance in the Stern School of Business at New York University. He is the 2003 Nobel Laureate in Economic Sciences, Director of the New York University Stern Volatility Institute, and co-founding President of the Society for Financial Econometrics. Scott Murray, PhD, is an Assistant Professor in the Department of Finance in the J. Mack Robinson College of Business at Georgia State University. He is the recipient of the 2014 Jack Treynor prize.
Investor Sentiment Effect In European Stock Markets
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Author : Elena Ferrer
language : en
Publisher: Ed. Universidad de Cantabria
Release Date : 2017-04-26
Investor Sentiment Effect In European Stock Markets written by Elena Ferrer and has been published by Ed. Universidad de Cantabria this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-04-26 with Business & Economics categories.
La presente obra se adentra en el estudio del potencial efecto del sentimiento del inversor sobre la valoración de activos, su efecto en los pronósticos de beneficios y recomendaciones de los analistas y su impacto sobre los activos derivados. Abarca el efecto del sentimiento del inversor en cuatro de los mercados europeos más importantes, Alemania, España, Francia y Reino Unido, mercados con características diferentes, en cuanto a tamaño, tipología del inversor y funcionamiento, lo que permite extraer importantes conclusiones adicionales.
Forecasting Expected Returns In The Financial Markets
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Author : Stephen Satchell
language : en
Publisher: Elsevier
Release Date : 2011-04-08
Forecasting Expected Returns In The Financial Markets written by Stephen Satchell and has been published by Elsevier this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011-04-08 with Business & Economics categories.
Forecasting returns is as important as forecasting volatility in multiple areas of finance. This topic, essential to practitioners, is also studied by academics. In this new book, Dr Stephen Satchell brings together a collection of leading thinkers and practitioners from around the world who address this complex problem using the latest quantitative techniques. *Forecasting expected returns is an essential aspect of finance and highly technical *The first collection of papers to present new and developing techniques *International authors present both academic and practitioner perspectives
Estimating The Cost Of Capital Implied By Market Prices And Accounting Data
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Author : Peter Easton
language : en
Publisher: Now Publishers Inc
Release Date : 2009
Estimating The Cost Of Capital Implied By Market Prices And Accounting Data written by Peter Easton and has been published by Now Publishers Inc this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with Business & Economics categories.
Estimating the Cost of Capital Implied by Market Prices and Accounting Data focuses on estimating the expected rate of return implied by market prices, summary accounting numbers, and forecasts of earnings and dividends. Estimates of the expected rate of return, often used as proxies for the cost of capital, are obtained by inverting accounting-based valuation models. The author describes accounting-based valuation models and discusses how these models have been used, and how they may be used, to obtain estimates of the cost of capital. The practical appeal of accounting-based valuation models is that they focus on the two variables that are commonly at the heart of valuations carried out by equity analysts -- forecasts of earnings and forecasts of earnings growth. The question at the core of this monograph is -- How can these forecasts be used to obtain an estimate of the cost of capital? The author examines the empirical validity of the estimates based on these forecasts and explores ways to improve these estimates. In addition, this monograph details a method for isolating the effect of any factor of interest (such as cross-listing, fraud, disclosure quality, taxes, analyst following, accounting standards, etc.) on the cost of capital. If you are interested in understanding the academic literature on accounting-based estimates of expected rate of return this monograph is for you. Estimating the Cost of Capital Implied by Market Prices and Accounting Data provides a foundation for a deeper comprehension of this literature and will give a jump start to those who have an interest in these topics. The key ideas are introduced via examples based on actual forecasts, accounting information, and market prices for listed firms, and the numerical examples are based on sound algebraic relations.
Geopolitical Risk On Stock Returns Evidence From Inter Korea Geopolitics
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Author : Seungho Jung
language : en
Publisher: International Monetary Fund
Release Date : 2021-10-22
Geopolitical Risk On Stock Returns Evidence From Inter Korea Geopolitics written by Seungho Jung and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-10-22 with Business & Economics categories.
We investigate how corporate stock returns respond to geopolitical risk in the case of South Korea, which has experienced large and unpredictable geopolitical swings that originate from North Korea. To do so, a monthly index of geopolitical risk from North Korea (the GPRNK index) is constructed using automated keyword searches in South Korean media. The GPRNK index, designed to capture both upside and downside risk, corroborates that geopolitical risk sharply increases with the occurrence of nuclear tests, missile launches, or military confrontations, and decreases significantly around the times of summit meetings or multilateral talks. Using firm-level data, we find that heightened geopolitical risk reduces stock returns, and that the reductions in stock returns are greater especially for large firms, firms with a higher share of domestic investors, and for firms with a higher ratio of fixed assets to total assets. These results suggest that international portfolio diversification and investment irreversibility are important channels through which geopolitical risk affects stock returns.
Esg And Responsible Institutional Investing Around The World A Critical Review
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Author : Pedro Matos
language : en
Publisher: CFA Institute Research Foundation
Release Date : 2020-05-29
Esg And Responsible Institutional Investing Around The World A Critical Review written by Pedro Matos and has been published by CFA Institute Research Foundation this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020-05-29 with Business & Economics categories.
This survey examines the vibrant academic literature on environmental, social, and governance (ESG) investing. While there is no consensus on the exact list of ESG issues, responsible investors increasingly assess stocks in their portfolios based on nonfinancial data on environmental impact (e.g., carbon emissions), social impact (e.g., employee satisfaction), and governance attributes (e.g., board structure). The objective is to reduce exposure to investments that pose greater ESG risks or to influence companies to become more sustainable. One active area of research at present involves assessing portfolio risk exposure to climate change. This literature review focuses on institutional investors, which have grown in importance such that they have now become the largest holders of shares in public companies globally. Historically, institutional investors tended to concentrate their ESG efforts mostly on corporate governance (the “G” in ESG). These efforts included seeking to eliminate provisions that restrict shareholder rights and enhance managerial power, such as staggered boards, supermajority rules, golden parachutes, and poison pills. Highlights from this section: · There is no consensus on the exact list of ESG issues and their materiality. · The ESG issue that gets the most attention from institutional investors is climate change, in particular their portfolio companies’ exposure to carbon risk and “stranded assets.” · Investors should be positioning themselves for increased regulation, with the regulatory agenda being more ambitious in the European Union than in the United States. Readers might come away from this survey skeptical about the potential for ESG investing to affect positive change. I prefer to characterize the current state of the literature as having a “healthy dose of skepticism,” with much more remaining to be explored. Here, I hope the reader comes away with a call to action. For the industry practitioner, I believe that the investment industry should strive to achieve positive societal goals. CFA Institute provides an exemplary case in its Future of Finance series (www.cfainstitute.org/research/future-finance). For the academic community, I suggest we ramp up research aimed at tackling some of the open questions around the pressing societal goals of ESG investing. I am optimistic that practitioners and academics will identify meaningful ways to better harness the power of global financial markets for addressing the pressing ESG issues facing our society.