The Effect Of Dispersion Of Analysts Forecasts On Stock And Bond Prices
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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 Bond Credit Spreads And Forecast Dispersion
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Author : Levent Guntay
language : en
Publisher:
Release Date : 2010
Corporate Bond Credit Spreads And Forecast Dispersion written by Levent Guntay and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.
Recent research establishes a negative relation between stock returns and dispersion of analysts' earnings forecasts, arguing that asset prices more reflect the views of optimistic investors because of short-sale constraints in equity markets. In this article, we examine whether a similar effect prevails in corporate bond markets. After controlling for common bond-level, firm-level, and macroeconomic variables, we find evidence that bonds of firms with higher dispersion demand significantly higher credit spreads than otherwise similar bonds and that changes in dispersion reliably predict changes in credit spreads. This evidence suggests a limited role of short-sale constraints in our corporate bond data sets. Consistent with a rational explanation, dispersion appears to proxy largely for future cash flow uncertainty in corporate bond markets.
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 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.
Uncertainty And Investment
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Author : Stephen Bond
language : en
Publisher:
Release Date : 2004
Uncertainty And Investment written by Stephen Bond and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with Capital investments categories.
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.
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 Effect Of Analysts Forecasts On Stock Market Returns
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Author : Stefano Bonini
language : en
Publisher:
Release Date : 2009
The Effect Of Analysts Forecasts On Stock Market Returns written by Stefano Bonini and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with categories.
Stock returns forecasting is one of the major objectives of financial analysts. Equity Analysts' forecasts, on the other side, are one of the major sources of information used by less informed investors in their asset allocation decisions. Therefore, analysing which major drivers affect time series of stock returns could allow to shed light over the price revelation process in capital markets. In this paper we propose a model aimed at predicting stock market by combining both macroeconomic and microeconomic factors. We first develop a standard APT approach with multiple macroeconomic factors as regressors. We then integrate the model by explicitly including a metric for intrinsic equity value, basing upon a proxy derived by the weighted average of Stock Market Consensus Forecasts by equity analysts. Third, we complete the model by imposing an ARMA specification for the error term, which allows identifying stock returns' stationarity moving over time. The resulting model shows both a strong fitting capability when tested in the in-sample period and a good predictive capability when applied to an out-of-sample period of monthly Italian stock market returns. In particular, we employed specific estimation procedures based upon recently developed statistics aimed at testing for both factors' equal predicting power and forecast encompassing. As a major empirical finding, our model suggests that the information conveyed by analysts' forecasts is indeed a factor in determining future stock prices, even if there is the possibility that the information transferred could be biased.
Stock Price Synchronicity And Analyst Coverage In Emerging Markets
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Author : Allaudeen Hameed
language : en
Publisher:
Release Date : 2003
Stock Price Synchronicity And Analyst Coverage In Emerging Markets written by Allaudeen Hameed 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.
This paper examines the relationship between the stock price synchronicity and analyst activity in emerging markets. Contrary to conventional wisdom that suggests that security analysts specialize in the production of firm-specific information, we find that the security analysts predominantly produce market-wide information. Using the R-square statistics of the market model as a measure of the synchronicity of stock price movements, we find that more analyst coverage leads to an increase in stock price synchronicity. Furthermore, after controlling for the influence of firm size on the lead-lag relation, we find that returns on high analyst-following portfolio lead returns on low analyst-following portfolio more than vice versa. We also find that the aggregate changes in the earnings forecast of high analyst-following portfolio affect the aggregate returns of the portfolio itself as well as the the low analyst-following portfolio while the aggregate changes in the earnings forecasts of low analyst-following portfolio have no predictive ability. Finally, when the forecast dispersion is high, the effect of analyst coverage on stock price synchronicity is reduced.
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.