Download or read book The Effect of Dispersion of Analysts Forecasts on Stock and Bond Prices written by Mun Soo Choi and published by . This book was released on 1993 with total page 238 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Relation between Dispersion in Analysts Forecasts and Stock Returns written by Shuping Chen and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Corporate Bond Credit Spreads and Forecast Dispersion written by Levent Guntay and published by . This book was released on 2010 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Analysts Forecast Dispersion and Stock Market Anomalies written by Tingting Liu and published by . This book was released on 2020 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Dispersion in Analysts Forecasts written by Davit Adut and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Dispersion in Analysts Earnings Forecasts and Credit Rating written by Doron Avramov and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Analysts Forecast Dispersion and Stock Split Announcements written by Maria Chiara Iannino and published by . This book was released on 2016 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Further Evidence on the Relation Between Analysts Forecast Dispersion and Stock Returns written by Orie E. Barron and published by . This book was released on 2008 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Uncertainty and Investment written by Stephen Bond and published by . This book was released on 2004 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Effect of Analysts Forecasts on Stock Market Returns written by Stefano Bonini and published by . This book was released on 2009 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book The Change in Financial Analysts Forecast Attributes for Value and Growth Stocks written by Pieter Johannes De Jong and published by ProQuest. This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Dispersion in Analyst Forecasts and the Profitability of Earnings Momentum Strategies written by Andreas P. Dische and published by . This book was released on 2002 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Financial Analysts Earnings Forecast Dispersion and Intraday Stock Price Variability Around Quarterly Earnings Announcements written by Gerald J. Lobo and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates the relationship between the dispersion of analysts' earnings forecasts and stock price variability around quarterly earnings announcements. Consistent with theoretical predictions, the empirical analysis shows that stock price variability at the time of earnings announcements is positively related to the degree of analysts' earnings forecast dispersion. The analysis also demonstrates that stock price variability is significantly greater from two days before to two days after the earnings announcement for firms ranked in the bottom third on the basis of analysts' forecast dispersion, whereas it is significantly greater from eight days prior to five days following the earnings announcement for firms in the top third. These results suggest that there is information about the earnings announcement that becomes available to at least a subset of investors prior to the earnings release. The increased level of price variability for five days following the earnings announcement suggests that market participants take different amounts of time to process the information conveyed by the earnings announcement.
Download or read book Reexamining Stock Valuation and Inflation written by Steven Alan Sharpe and published by . This book was released on 2001 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Financial Analysts Earnings Forecast Dispersion and Intraday Stock Price Variability Around Quarterly Earnings Announcements written by Samuel S. Tung and published by . This book was released on 2020 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates the relationship between the dispersion of analysts? earnings forecasts and stock price variability around quarterly earnings announcements. Consistent with theoretical predictions, the empirical analysis shows that stock price variability at the time of earnings announcements is positively related to the degree of analysts? earnings forecast dispersion. The analysis also demonstrates that stock price variability is significantly greater from two days before to two days after the earnings announcement for firms ranked in the bottom third on the basis of analysts? forecast dispersion, whereas it is significantly greater from eight days prior to five days following the earnings announcement for firms in the top third. These results suggest that there is information about the earnings announcement that becomes available to at least a subset of investors prior to the earnings release. The increased level of price variability for five days following the earnings announcement suggests that market participants take different amounts of time to process the information conveyed by the earnings announcement.
Download or read book Dispersion of Forecasts and Stock Returns written by Bilal Erturk and published by . This book was released on 2006 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: Prior research has established that stocks with high dispersion of earnings forecasts yield lower subsequent returns. I offer a new explanation based on some analysts' reluctance to revise their forecasts downward. I show that analysts' sluggish and non-synchronous response to negative information results in dispersion of forecasts. The inertia in downward forecast revisions also leads to market underreaction to bad news. Therefore, the negative relationship between dispersion and subsequent returns may be partially attributable to some analysts' sluggish response to negative information. I also test whether dispersion of forecasts exacerbates overpricing (Miller (1977)), but find that when dispersion of forecasts increases, prices decrease.
Download or read book The Effect of Differential Amounts of Interim Information on Stock Prices Variability written by Amal Abdel Wakil Mahmoud and published by . This book was released on 1985 with total page 226 pages. Available in PDF, EPUB and Kindle. Book excerpt:
