Download or read book Chronic Bias in Earnings Forecasts written by Seung-Woog (Austin) Kwag and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Whatever the source or explanation of bias in forecasts of company earnings, if such bias persists, it is potentially discoverable and exploitable by investors. This research addresses (1) whether characterizing forecasts as if they were a homogeneous group with respect to bias is accurate or useful and (2) whether a long-term record of forecast errors contains information useful in predicting subsequent errors. We found that earnings forecasts are heterogeneous with respect to direction and degree of bias. We also found evidence of extremes in optimism and pessimism and that extreme errors tend to persist in the same direction, which suggests certain potentially profitable trading strategies.

Download or read book Bias in European Analysts Earnings Forecasts written by Stan Beckers and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Forecasting company earnings is a difficult and hazardous task. In an efficient market where analysts learn from past mistakes, there should be no persistent and systematic biases in consensus earnings accuracy. Previous research has already established how some (single) individual-company characteristics systematically influence forecast accuracy. So far, however, the effect on consensus earnings biases of a company's sector and country affiliation combined with a range of other fundamental characteristics has remained largely unexplored. Using data for 1993-2002, this article disentangles and quantifies for a broad universe of European stocks how the number of analysts following a stock, the dispersion of their forecasts, the volatility of earnings, the sector and country classification of the covered company, and its market capitalization influence the accuracy of the consensus earnings forecast.

Download or read book Are Markets Rational written by Seung-Woog Kwag and published by . This book was released on 2002 with total page 110 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book An Empirical Investigation of Bias in Analysts Earnings Forecasts written by Hakan Saraoglu and published by . This book was released on 1996 with total page 318 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book A Reexamination of Bias in Management Earnings Forecasts written by Jong-Hag Choi and published by . This book was released on 2000 with total page 286 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Bias in Analysts Earnings Forecasts written by Seung-Woog (Austin) Kwag and published by . This book was released on 2003 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: If either economic incentives or psychological phenomena cause the bias in analysts' forecasts to persist long enough, it would be potentially discoverable and exploitable by investors. quot;Exploitationquot; in this context implies that investors, through examination of historical forecasting performance, can more or less reliably estimate the direction and extent of bias, and impute unbiased estimates for themselves, given analysts' forecasts. The absence of persistence in forecast errors would suggest that analysts' own behavior ultimately quot;self-correctsquot; within a time frame that eliminates the possibility that the patterns could be exploited by investors. We use two look-back methods that capture salient features of analysts' past forecasting behavior to form quintile portfolios that describe the range of analysts' forecasting behavior. Parametric and nonparametric tests are performed to determine whether the two portfolio formation methods provide predictive power with respect to subsequent forecast errors. The findings support a conclusion that analysts' behaviors in both optimistic and pessimistic extremes do not entirely self-correct, leaving open the possibility that investors may find historical forecast errors useful in making inferences about current forecasts.

Download or read book Bias in Analysts Earnings Forecasts as an Explanation for the Long Run Underperformance of Stocks Following Equity Offerings written by Ashiq Ali and published by . This book was released on 2006 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: For firms conducting initial or seasoned equity offerings, recent studies document that their stock returns are lower than those of non-issuers for about five years following the issue, and this underperformance is greater for small issuers. This study shows that analysts' earnings forecasts have greater optimistic bias for issuers than for non-issuers during the five year period. Moreover, the incremental optimistic bias is greater for small issuers. This result is consistent with the Loughran and Ritter (1995) conjecture that one of the reasons for the long-run underperformance of issuers' stocks is optimistic bias in the market's expectations of these firms' earnings.

Download or read book The Effect of Issuing Biased Earnings Forecasts on Analysts Access to Management and Survival written by Bin Ke and published by . This book was released on 2006 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study offers evidence on the earnings forecast bias analysts use to please firm management and the associated benefits they obtain from issuing such biased forecasts in the years prior to Regulation Fair Disclosure. Analysts who issue initial optimistic earnings forecasts followed by pessimistic earnings forecasts before the earnings announcement produce more accurate earnings forecasts and are less likely to be fired by their employers. The effect of such biased earnings forecasts on forecast accuracy and firing is stronger for analysts who follow firms with heavy insider selling and hard-to-predict earnings. The above results hold regardless of whether a brokerage firm has investment banking business or not. These results are consistent with the hypothesis that analysts use biased earnings forecasts to curry favor with firm management in order to obtain better access to management's private information.

Download or read book Managerial Behavior and the Bias in Analysts Earnings Forecasts written by Lawrence D. Brown and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Managerial behavior differs considerably when managers report quarterly profits versus losses. When they report profits, managers seek to just meet or slightly beat analyst estimates. When they report losses, managers do not attempt to meet or slightly beat analyst estimates. Instead, managers often do not forewarn analysts of impending losses, and the analyst's signed error is likely to be negative and extreme (i.e., a measured optimistic bias). Brown (1997 Financial Analysts Journal) shows that the optimistic bias in analyst earnings forecasts has been mitigated over time, and that it is less pronounced for larger firms and firms followed by many analysts. In the present study, I offer three explanations for these temporal and cross-sectional phenomena. First, the frequency of profits versus losses may differ temporally and/or cross-sectionally. Since an optimistic bias in analyst forecasts is less likely to occur when firms report profits, an optimistic bias is less likely to be observed in samples possessing a relatively greater frequency of profits. Second, the tendency to report profits that just meet or slightly beat analyst estimates may differ temporally and/or cross-sectionally. A greater tendency to 'manage profits' (and analyst estimates) in this manner reduces the measured optimistic bias in analyst forecasts. Third, the tendency to forewarn analysts of impending losses may differ temporally and/or cross-sectionally. A greater tendency to 'manage losses' in this manner also reduces the measured optimistic bias in analyst forecasts. I provide the following temporal evidence. The optimistic bias in analyst forecasts pertains to both the entire sample and the losses sub-sample. In contrast, a pessimistic bias exists for the 85.3% of the sample that consists of reported profits. The temporal decrease in the optimistic bias documented by Brown (1997) pertains to both losses and profits. Analysts have gotten better at predicting the sign of a loss (i.e., they are much more likely to predict that a loss will occur than they used to), and they have reduced the number of extreme negative errors they make by two-thirds. Managers are much more likely to report profits that exactly meet or slightly beat analyst estimates than they used to. In contrast, they are less likely to report profits that fall a little short of analyst estimates than they used to. I conclude that the temporal reduction in optimistic bias is attributable to an increased tendency to manage both profits and losses. I find no evidence that there exists a temporal change in the profits-losses mix (using the I/B/E/S definition of reported quarterly profits and losses). I document the following cross-sectional evidence. The principle reason that larger firms have relatively less optimistic bias is that they are far less likely to report losses. A secondary reason that larger firms have relatively less optimistic bias is that their managers are relatively more likely to report profits that slightly beat analyst estimates. The principle reason that firms followed by more analysts have relatively less optimistic bias is that they are far less likely to report losses. A secondary reason that firms followed by more analysts have relatively less optimistic bias is that their managers are relatively more likely to report profits that exactly meet analyst estimates or beat them by one penny. I find no evidence that managers of larger firms or firms followed by more analysts are relatively more likely to forewarn analysts of impending losses. I conclude that cross-sectional differences in bias arise primarily from differential 'loss frequencies,' and secondarily from differential 'profits management.' The paper discusses implications of the results for studies of analysts forecast bias, earnings management, and capital markets. It concludes with caveats and directions for future research.

Download or read book Accuracy Bias and Dispersion in Analysts Earnings Forecasts the Case of Cross listed Foreign Firms written by Somnath Das (Saudagaran, Shahrokh M.) and published by . This book was released on with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Quantifying Cognitive Biases in Analyst Earnings Forecasts written by Geoffrey C. Friesen and published by . This book was released on 2006 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a formal model of analyst earnings forecasts that discriminates between rational behavior and that induced by cognitive biases. In the model, analysts are Bayesians who issue sequential forecasts that combine new information with the information contained in past forecasts. The model enables us to test for cognitive biases, and to quantify their magnitude. We estimate the model and find strong evidence that analysts are overconfident about the precision of their own information and also subject to cognitive dissonance bias. But they are able to make corrections for bias in the forecasts of others. We show that our measure of overconfidence varies with book-to-market ratio in a way consistent with the findings of Daniel and Titman (1999). We also demonstrate the existence of these biases in international data.

Download or read book Biased Forecasts or Biased Earnings The Role of Reported Earnings in Explaining Apparent Bias and Over Underreaction in Analysts Earnings Forecasts written by Jeffery S. Abarbanell and published by . This book was released on 2012 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: We demonstrate the role of three empirical properties of cross-sectional distributions of analysts' forecast errors in generating evidence pertinent to three important and heretofore separately analyzed phenomena studied in the analyst earnings forecast literature: purported bias (intentional or unintentional) in analysts' earnings forecasts, forecaster over/underreaction to information in prior realizations of economic variables, and positive serial correlation in analysts' forecast errors. The empirical properties of interest include: the existence of two statistically influential asymmetries found in the tail and the middle of typical forecast error distributions, the fact that a relatively small number of observations comprise these asymmetries and, the unusual character of the reported earnings benchmark used in the calculation of the forecast errors that fall into the two asymmetries that is associated with firm recognition of unexpected accruals. We discuss competing explanations for the presence of these properties of forecast error distributions and their implications for conclusions about analyst forecast rationality that are pertinent to researchers, regulators, and investors concerned with the incentives and judgments of analysts.Previously titled quot;Biased Forecasts or Biased Earnings? The Role of Earnings Management in Explaining Apparent Optimism and Inefficiency in Analysts' Earnings Forecastsquot.

Download or read book Discussion written by Lawrence D. Brown and published by . This book was released on 2014 with total page 6 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Accuracy and Bias of Equity Values Inferred from Analysts Earnings Forecasts written by Takashi Yaekura and published by . This book was released on 2001 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: We evaluate the extent to ...

Download or read book Share Pledging and Bias in Analyst Earnings Forecasts written by 徐悠 and published by . This book was released on 2020 with total page 73 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Ex Post Bias in Management Earnings Forecasts written by Afshad J. Irani and published by . This book was released on 1999 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates the effect of proprietary information, disclosure-related legal liability, earnings variability, financial distress, and external financing on bias in management earnings forecasts. Bias, specifically ex post bias (as is referred to in the management forecast literature), exists if the expected value of the observed management earnings forecasts differs from actual earnings. The effect of the test variables on ex post bias is investigated by examining whether a firm's forecast error (measure of ex post bias and defined as actual earnings minus management earnings forecast) is a function of the aforementioned variables. Proprietary information, disclosure-related legal liability, and earnings variability are hypothesized to be positively associated with ex post bias, while external financing and financial distress are expected to be negatively correlated. All the independent variables are measured using public information available at the time that the financial statements are released.Using a sample of 267 management earnings forecasts released during the period 1990-95 in the first three quarters of the fiscal year, I find that these forecasts are on average optimistic. Results from the multivariate regression analysis find that three of the five factors, proprietary information, financial distress and earnings variability, are significant in explaining ex post bias. For the most part, these findings are robust across various sub-samples.

Download or read book Analysts Conflict of Interest and Biases in Earnings Forecasts written by Louis Kuo Chi Chan and published by . This book was released on 2003 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: Analysts' earnings forecasts are influenced by their desire to win investment banking clients. We hypothesize that the equity bull market of the 1990s, along with the boom in investment banking business, exacerbated analysts' conflict of interest and their incentives to adjust strategically forecasts to avoid earnings disappointments. We document shifts in the distribution of earnings surprises, the market's response to surprises and forecast revisions, and in the predictability of non-negative surprises. Further confirmation is based on subsamples where conflicts of interest are more pronounced, including growth stocks and stocks with consecutive non-negative surprises; however shifts are less notable in international markets