Dispersion In Analysts Forecasts
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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.
Dispersion In Analysts Forecasts
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Author : Davit Adut
language : en
Publisher:
Release Date : 2003
Dispersion In Analysts Forecasts written by Davit Adut and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003 with categories.
Financial analysts are an important group of information intermediaries in the capital markets. Their reports, including both earnings forecasts and stock recommendations, are widely transmitted and have a significant impact on stock prices (Womack 1996; Lys and Sohn 1990, among others). Empirical accounting research frequently relies on analysts' forecasts to construct proxies for variables of interest. For example, the error in mean forecast is used as a proxy for earnings surprise (e.g., Brown et al. 1987; Wiedman 1996; Bamber et al. 1997). More recent papers provide evidence that the mean consensus forecast is used as a benchmark for evaluating firm performance. (Degeorge et al. 1999; Kasznik and McNichols 2002; Lopez and Rees 2002). Another stream of research uses the forecast dispersion as a proxy for the uncertainty or the degree of consensus among analysts and focuses on the information properties of analysts (e.g., Daley et al. 1988; Ziebart 1990; Imhoff and Lobo 1992; Lang and Lundholm 1996; Barron and Stuerke 1998; Barron et al. 1998). In this paper I combine the two streams of research, and investigate how lack of consensus changes the information environment of analysts and whether the markets perceive this change. More specifically, I investigate the amount of private information in a divergent earnings estimate (i.e. one that is above or below the consensus), whether the markets react to it at either the time of the forecast release, at the realization of actual earnings, and whether Regulation Fair Disclosure has changed the information environment differently for high and low dispersion firms.
Dispersion In Analysts Earnings Forecasts And Credit Rating
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Author : Doron Avramov
language : en
Publisher:
Release Date : 2020
Dispersion In Analysts Earnings Forecasts And Credit Rating written by Doron Avramov 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.
This paper shows that the puzzling negative cross-sectional relation between dispersion in analysts' earnings forecasts and future stock returns may be explained by financial distress, as proxied by credit rating downgrades. Focusing on a sample of firms rated by Samp;P, we show that the profitability of dispersion-based trading strategies concentrates in a small number of the worst-rated firms and is significant only during periods of deteriorating credit conditions. In such periods, the negative dispersion-return relation emerges as low-rated firms experience substantial price drop along with considerable increase in forecast dispersion. Moreover, even for this small universe of worst-rated firms, the dispersion-return relation is nonexistent when either the dispersion measure or return is adjusted by credit risk. The results are robust to previously proposed explanations for the dispersion effect such as short-sale constraints and leverage.
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.
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.
The Influence Of Change In Dispersion In Analysts Forecasts On The Earnings Response Coefficient
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Author : Gordon Cohn (M.)
language : en
Publisher:
Release Date : 1997
The Influence Of Change In Dispersion In Analysts Forecasts On The Earnings Response Coefficient written by Gordon Cohn (M.) and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1997 with Accounting and price fluctuations categories.
Discussion
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Author : Lawrence D. Brown
language : en
Publisher:
Release Date : 2014
Discussion written by Lawrence D. Brown and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
The Effect Of Dispersion Of Analysts Forecasts On Stock And Bond Prices
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Author : Mun Soo Choi
language : en
Publisher:
Release Date : 1993
The Effect Of Dispersion Of Analysts Forecasts On Stock And Bond Prices written by Mun Soo Choi and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1993 with categories.
Corporate Disclosure Analyst Forecast Dispersion And Stock Returns
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Author : Ashiq Ali
language : en
Publisher:
Release Date : 2016
Corporate Disclosure Analyst Forecast Dispersion And Stock Returns written by Ashiq Ali 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 examines whether a corporate disclosure practice is a reason for the forecast dispersion anomaly -- the negative relation between analyst forecast dispersion and future stock returns. Prior studies have shown that firms tend to disclose good news in a timely manner and delay the disclosure of bad news, and that withholding of news leads to greater dispersion in analysts' forecasts. Accordingly, we predict that firms with higher dispersion in analysts' earnings forecasts are more likely to experience poor earnings in subsequent quarters, and find evidence consistent with this prediction. After controlling for the relation between forecast dispersion and future earnings, we find that forecast dispersion is no longer negatively related to future stock returns. These results suggest that firms' tendency to withhold bad news increases forecast dispersion as well as causes the market to temporarily overvalue stocks until the bad news is publicly released.
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.