Further Evidence On The Relation Between Analysts Forecast Dispersion And Stock Returns

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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.

Financial Analysts Forecasts And Stock Recommendations

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Author : Sundaresh Ramnath
language : en
Publisher: Now Publishers Inc
Release Date : 2008

Financial Analysts Forecasts And Stock Recommendations written by Sundaresh Ramnath 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 2008 with Business & Economics categories.

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.

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.

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.

The Change In Financial Analysts Forecast Attributes For Value And Growth Stocks

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Author : Pieter Johannes De Jong
language : en
Publisher: ProQuest
Release Date : 2007

The Change In Financial Analysts Forecast Attributes For Value And Growth Stocks written by Pieter Johannes De Jong and has been published by ProQuest this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with Economic forecasting categories.

This research will concentrate on the changes in earnings forecasts, forecast accuracy and forecast dispersion for growth and value stocks after Reg FD. Each topic is presented in a separate essay. The first essay tests if growth and value stock returns respond more to forecasted earnings changes than they do to changes in earnings and whether these stock returns respond in a different fashion before and after Reg FD. This phenomenon is stronger for growth stock portfolio strategies than it is for value stock portfolios. After Reg FD, the overall impact of earnings expectations on stock returns is smaller, especially for growth stock returns. The second essay examines financial analysts' earnings forecast accuracy in value and growth stocks before and after the introduction of Reg FD. Accuracy for both stock groups (value and growth stocks) has improved after the introduction of Reg FD. The results in this essay provide additional evidence indicating that analysts did not just misinterpret available news but consciously tried to maintain relationships with managers. However, Reg FD efficiently limited these relationships between managers of growth firms and analysts so that the monetary advantage from manipulating earnings forecasts before the introduction of Reg FD no longer exists. The third essay evaluates the hypothesis stating that forecast dispersion, on both growth and value stock returns, has increased after the introduction Reg FD. However, the increased dispersion found at the second quarter of 2001 drastically dissipates at the second quarter of 2002, although value stock forecast dispersion before earnings announcement and value stock belief jumbling remain higher. The results in this essay suggest that corporate voluntary disclosure created a greater variety of opinions and, therefore, more uncertainty about value stocks. Also, value stock returns have a stronger inverse relationship with dispersion because financial analysts have become more uncertain about value firms' performance. The bigger the disagreement about a stock's value, the higher the market price relative to the true value of the stock, and the lower its future return.

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 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.

The Influence Of Forecast Dispersion On The Incremental Explanatory Power Of Earnings Book Value And Analyst Forecasts On Market Prices

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Author : Daniel M. Bryan
language : en
Publisher:
Release Date : 2006

The Influence Of Forecast Dispersion On The Incremental Explanatory Power Of Earnings Book Value And Analyst Forecasts On Market Prices written by Daniel M. Bryan 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.

This study investigates the influence of analyst forecast dispersion on Ohlson's (2001) proposed linear information dynamics where consensus analyst forecasts are suggested as a proxy for other information. Our results indicate that Ohlson's proposed valuation model is most descriptive of market pricing when forecast dispersion, and hence information asymmetry is high. Our results also suggest that when analysts are confronted with high information asymmetry, they tend to focus less on accounting fundamentals and rely more on other non-accounting information, thus decreasing the correlation between the explanatory power of analyst forecasts and that of earnings and book value.

Term Structure Of Analyst Forecast Dispersion And Future Stock Returns

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Author : 李世仲
language : en
Publisher:
Release Date : 2016

Term Structure Of Analyst Forecast Dispersion And Future Stock Returns written by 李世仲 and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with Business enterprises categories.

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.