Download or read book The Role of Analysts Forecasts in the Momentum Effect written by Rand Kwong Yew Low and published by . This book was released on 2016 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: We evaluate the extent to which sell-side equity analysts can facilitate market efficiency when there is increasing uncertainty about a stock's future value. The prevalence of the 52-week-high momentum anomaly, which can be largely attributed to information uncertainty, provides a setting for examining the value and timing of analysts' earnings forecast revisions. Our study finds that analysts can provide value-relevant signals to investors by picking up indicators of momentum. The ability to identify under or over-valued stocks suggests that analysts are important information intermediaries in the price-continuation momentum effect. However, we also observe pervasive asymmetric reaction to good and bad news throughout our study that is consistent with incentive-driven reporting and optimistic biases. Nevertheless, analysts' forecast revisions are informative at different stages to re-establish stock prices back to their fundamental valuation.
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 Analyst Forecast Momentum written by Paul J. Irvine and published by . This book was released on 2017 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: A great number of academic papers evaluate the potential for incentive-driven bias in sell-side analysts' earnings forecasts. Yet bias does not necessarily invalidate a forecast, nor does it impinge on its relative quality. We find that analysts' forecasts are optimistic relative to recently introduced fundamental alternatives. However, analysts' forecasts have lower absolute deviation and the information in their earnings forecasts has predictive value for near-term stock returns. We propose the latter result as a previously unidentified form of earnings momentum. We find that this form of earnings momentum is even stronger for quarterly forecasts than annual forecasts, suggesting that analysts' have particularly strong incentives directed to forecasting quarterly earnings. Investing with optimistic analysts is a rational investment strategy, rather than a misguided one, when the investment horizon is less than one year.
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 Financial Gatekeepers written by Yasuyuki Fuchita and published by Brookings Institution Press. This book was released on 2007-02-01 with total page 216 pages. Available in PDF, EPUB and Kindle. Book excerpt: A Brookings Institution Press and Nomura Institute of Capital Markets Research publication Developed country capital markets have devised a set of institutions and actors to help provide investors with timely and accurate information they need to make informed investment decisions. These actors have become known as "financial gatekeepers" and include auditors, financial analysts, and credit rating agencies. Corporate financial reporting scandals in the United States and elsewhere in recent years, however, have called into question the sufficiency of the legal framework governing these gatekeepers. Policymakers have since responded by imposing a series of new obligations, restrictions, and punishments—all with the purpose of strengthening investor confidence in these important actors. Financial Gatekeepers provides an in-depth look at these new frameworks, especially in the United States and Japan. How have they worked? Are further refinements appropriate? These are among the questions addressed in this timely and important volume. Contributors include Leslie Boni (University of New Mexico), Barry Bosworth (Brookings Institution), Tomoo Inoue (Seikei University), Zoe-Vonna Palmrose (University of Southern California), Frank Partnoy (University of San Diego School of Law), George Perry (Brookings Institution), Justin Pettit (UBS), Paul Stevens (Investment Company Institute), Peter Wallison (American Enterprise Institute).
Download or read book Momentum Strategies written by Louis K. C. Chan and published by . This book was released on 1995 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: We relate the predictability of future returns from past returns to the market's underreaction to information, focusing on past earnings news. Past return and past earnings surprise each predict large drifts in future returns after controlling for the other. There is little evidence of subsequent reversals in the returns of stocks with high price and earnings momentum. Market risk, size and book-to- market effects do not explain the drifts. Security analysts' earnings forecasts also respond sluggishly to past news, especially in the case of stocks with the worst past performance. The results suggest a market that responds only gradually to new information.
Download or read book Do Analysts Understand Momentum written by Benjamin Carl Anderson and published by . This book was released on 2015 with total page 220 pages. Available in PDF, EPUB and Kindle. Book excerpt: Target prices are analysts' forecasts of a firm's stock price. Although target prices can be used to help market participants make investment decisions, much is still unknown about how analysts make these forecasts. Because prior literature documents momentum in stock returns, in this paper, I examine whether target prices reflect the information in returns over the six months prior to the target price announcement date. I find that target prices systematically underestimate the persistence of these six month returns. I further find that the forecasted return in target price revisions is more pessimistic following periods of very good stock performance and more optimistic following periods of very poor stock performance. However, I find that target prices made by 'All-Star' analysts reflect the information in six month returns when these target prices follow a period of very poor stock performance.
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 Understanding Momentum in Investment Technical Analysis written by Michael C. Thomsett and published by Business Expert Press. This book was released on 2019-06-24 with total page 146 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book explains and demonstrates the concept of momentum in chart analysis, which is of great interest to technical analysts. It includes complete explanations of overbought and oversold, where momentum fits in the broader science of technical analysis, and the importance of moving average crossover. Five major momentum oscillators are explained in depth: relative strength index, MACD, rate of change, stochastics, and Bollinger Bands. Finally, the book provides trading guidance based on momentum, involving coordination of oscillators with other indicators, reversal, and continuation signals. Momentum powerfully identifies the strength and speed of price movement. Through the use of index calculations, momentum is effective when used as a confirming indicator for other signals found in price, volume, or moving averages. Often overlooked by traders focused solely on price reversals or continuation signals, momentum provides a context to price behavior and to the price trend, and can vastly improves the timing of both entry and exit of trades.
Download or read book A Rational Expectations Approach to Macroeconometrics written by Frederic S. Mishkin and published by University of Chicago Press. This book was released on 2007-11-01 with total page 184 pages. Available in PDF, EPUB and Kindle. Book excerpt: A Rational Expectations Approach to Macroeconometrics pursues a rational expectations approach to the estimation of a class of models widely discussed in the macroeconomics and finance literature: those which emphasize the effects from unanticipated, rather than anticipated, movements in variables. In this volume, Fredrick S. Mishkin first theoretically develops and discusses a unified econometric treatment of these models and then shows how to estimate them with an annotated computer program.
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 Expectations and the Structure of Share Prices written by John G. Cragg and published by University of Chicago Press. This book was released on 2009-05-15 with total page 185 pages. Available in PDF, EPUB and Kindle. Book excerpt: John G. Cragg and Burton G. Malkiel collected detailed forecasts of professional investors concerning the growth of 175 companies and use this information to examine the impact of such forecasts on the market evaluations of the companies and to test and extend traditional models of how stock market values are determined.
Download or read book Analyst Forecasts written by Sanjay Banerjee and published by . This book was released on 2011 with total page 94 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Analyst Underreaction and the Post Forecast Revision Drift written by Po-Chang Chen and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The post-forecast revision drift (PFRD), the phenomenon of delayed stock price reactions to analyst forecast revisions, is a well-documented market anomaly. Prior research attributes PFRD to underreaction by investors to analyst forecast revisions. This study investigates the role of the analyst forecast revision process itself in the PFRD anomaly. Using a large sample of US firms, we confirm prior findings of a positive serial correlation (momentum) in individual analysts' revisions to their earnings forecasts and, based on both indirect and direct tests, document a positive association between this momentum and PFRD. Further analyses revealthat both the forecast revision momentum and PFRD vary in similar ways with respect to the nature of the news driving the revisions and the information environment. Collectively, our findings show that underreaction by individual analysts in the forecast revision process is an important contributor to the PFRD phenomenon. Full paper available at https://doi.org/10.1111/jbfa.12491.
Download or read book Characteristics of Price Informative Analyst Forecasts written by Cristi A. Gleason and published by . This book was released on 2001 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the effect of signal attributes and analyst identity on the price impact of an earnings forecast revision. We measure the price impact immediately upon the release of a forecast, as well as over the next twenty-four months. We find that an analyst's own prior forecast and the consensus forecast at the time of the release are both important in determining the price impact of a revision. Specifically, quot;confirmingquot; signals (revisions that are above (or below) both the prior consensus and the analyst's own prior forecast) have much greater price impact than quot;conflictingquot; signals (revisions that are in between the prior consensus and the analyst?s own prior forecast). We document a substantial post-revision price drift after the release of confirming signals. Upward (downward) confirming revisions are associated with higher (lower) future size-adjusted returns. The predictive power of these confirming revisions is large even after controlling for price momentum, firm size, and the B/M ratio. The main predictive power derives from the direction of the confirming signal. Controlling for the direction of the revision, the magnitude of the revision is unimportant in return prediction.We also examine the relation between analyst identity and price impact. Specifically, we evaluate the incremental price effect associated with revisions issued by Institutional Investor All-Stars, Wall Street Journal Award Winners, and analysts deemed to be more accurate by the Park and Stice (2000) algorithm. We find that the immediate price respond is greater for revisions issued by all the quot;superiorquot; analysts. In the following months, revisions by II-All Stars exhibit weaker price drifts, and revisions by the Park and Stice (2000) analysts exhibit stronger price drifts. However, taken together, signal attributes are more important than analyst identity in the prediction of subsequent stock returns.
Download or read book Analysts Forecast Error written by Kris Boudt and published by . This book was released on 2017 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the profitability of implementing a short term trading strategy based on predicting the error in analysts' earnings per share forecasts using publicly available information. Since large earnings surprises may lead to extreme values in the forecast error series that disrupt their smooth autoregressive dynamics, we propose to use robust fixed effect panel estimation methods as an alternative to panel least squares or the pooled least absolute deviations estimator. For the I/B/E/S data from 1998 to 2010, we show that the strategy of taking a long (short) position in stocks with the most pessimistic (optimistic) consensus forecast and closing the position on the first post announcement day has an annual gross abnormal return of 16.56%, after correcting for market risk, size, book-to-market and price momentum effects. A key insight is that the profitability of the trading strategy stems from using robust forecasting methods.
Download or read book Momentum Around the Globe The Pervasiveness of the Momentum Effect in Relative Stock Performance written by Andra Musat and published by . This book was released on 2015-06-11 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2015 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 2,0, University of Mannheim, course: Behavioral Finance, language: English, abstract: Extensive research has been dedicated to the momentum effect in the past two decades since it was first documented in 1993 by Jegadeesh and Titman. Put simply, momentum can be understood as persistence in relative stock performance: stocks which have performed well over the past three to twelve months continue to outperform stocks which have performed poorly over the next three to twelve months. The aim of this paper is to gather, compare and evaluate the available evidence so far to show that momentum is effective globally, with a focus on analyzing co-movement. Besides the geographical dimension, the paper will also look at the extent to which profitable momentum returns are prevalent in time and are not only confined to stocks, but are characteristic for much more asset classes. As such, the main contribution of the paper is the brief analysis of the pervasiveness of the momentum effect along three dimensions: geographical, temporal and across asset classes.
