Australian evidence on the accuracy of analysts' expectations The value of consensus and timeliness prior to the earnings announcement (original) (raw)
Related papers
Consensus analysts' earnings forecasts and security returns
Asia Pacific Journal of Management, 1996
This study examines the information content and informational efficiency of consensus analysts'forecasts' in an Australian setting. Consistent with and , analysts'forecasts were found to possess information content but did not incorporate all publicly available information. The empirical analysis in this paper suggests tlutt negative security returns are associated with higher forecast errors. This contrasts with the results of and is consistent with a positive bias in fi)recasts. However, this did not preclude analysts'forecasts from being viable proxies for the market k expectations of fiaure earnings.
Herding in analyst earnings forecasts: evidence from the United Kingdom
European Financial Management, 1999
We present an empirical analysis of herding behavior in analyst forecasts of earnings-per-share. Herding is defined as`excessive agreement' among analyst predictions, i.e., a surprising degree of consensus relative to the predictability of corporate earnings. The data are for U.K. companies between 1986 and 1997. We examine the effects of forecast horizon and analyst coverage on forecast accuracy and dispersion. The evidence supports overoptimism, overreaction, and herding in analyst forecasts.
Investment Analysts’ Forecasts of Earnings
2009
The literature on investment analysts' forecasts of firms' earnings and their forecast errors is enormous. This paper summarizes the evidence on the distribution of analysts' forecasts and forecast errors using data for all U.S. firms from 1990 to 2004. The evidence indicates substantial asymmetry of earnings, earning forecasts, and forecast errors. There is strong support for average and median earning forecasts being higher than actual earnings a year before the earnings announcement. Such differences between earnings and forecasts also exist across time periods and industries. A month before the earnings announcement, the mean and median differences are small. (JEL G17, C53)
Journal of Business Research, 1992
This paper examines the effects of disagreement in financial analysts' earnings forecasts on the accuracy of analysts', time series, and combined forecasts made at four forecast horizons. The empirical analysis indicates that, while analysts do better than any of the three time series models studied, simple combinations of analysts' and time series forecasts are superior to forecasts from either source at every horizon. The accuracy of individual and combined forecasts is inversely related to the dispersion of analysts' forecasts, and the improvement from combination is greatest when analysts' forecast dispersion is greatest and the forecast horizon longest.
Individual Analysts Earnings Forecasts: Evidence For Overreaction In The UK Stock Market
International Business & Economics Research Journal (IBER), 2011
This paper presents an analysis of two forms of overreaction (generalized overreaction and overreaction to prior earnings changes) in analysts earnings forecasts for the UK stock market, using a sample of individual forecasts of earning per share from a British investment bank over the period 1989-2002. Given that previous UK empirical research over 1980s and mid 90s has provided limited and contradictory findings, we investigate whether and how overreaction of analysts forecasts varies across forecast horizons, firm size (small and large) and growth opportunities (high and low P/E ratio) in order to provide further and comparable evidence. Overall, our findings support the generalized overreaction hypothesis but reject the firm size effect, the overreaction for high P/E ratio companies and the higher overreaction regarding the forecasting horizon. Keywords: Overreaction, Underreaction, Analysts forecasts, forecast horizons, size effect, price/earnings ratio.
A study of analyst forecast reliability in Australia
2013
The purpose of this paper is to determine whether time weighted consensus estimates offer a more effective method for predicting company actual EPS figures than simple mean or median analysis. The study aims to construct a more comprehensive earnings forecast signal using analyst earnings forecasts that have been weighted based on the timeliness of updates. Aimed at extracting valuable information from timely analyst forecasts, the time weighted earnings signal (TWES) methodology allows extracting valuable information from analysts who possess some unique insights about the market and issue their updates more frequently. One would expect the time signal to reflect a more realistic representation of analyst estimate changes and thus be more effective in predicting the companies' reported EPS than the mean and median.
Journal of International Financial Management and Accounting, 1998
This paper examines differences in analysts' earnings forecast characteristics for foreign incorporated non-U.S. firms cross-listed in the U.S. stock markets relative to a control sample of purely domestic firms. Examining summary earnings forecasts over the calendar years 1984 through 1989, this paper provides evidence that there are statistically significant differences in bias and accuracy between domestic and cross-listed foreign firms. Consistent with prior research, we find a horizon effect in accuracy; i.e., accuracy improves as we get closer to the actual earnings announcement for both types of firms. However, the differences in accuracy between the cross-listed and domestic firms persist only in the earlier forecast horizons where analysts' forecasts are less accurate for foreign cross-listed firms compared with domestic firms. The evidence is also consistent with analysts' exhibiting less optimism with respect to cross-listed foreign firms compared with the domestic firms. Finally, the paper also documents that there is a greater consensus among analysts for foreign cross-listed firms than for domestic firms.
Earnings Predictability And Broker-Analysts’ Earnings Forecast Bias
Journal of Applied Business Research (JABR)
Scholars have reasoned that analysts issue optimistic forecasts to improve their access to managers’ private information when earnings are unpredictable. While this requires a managerial preference for analyst forecast optimism, the observed walk-down of analyst expectations to beatable forecasts is consistent with a managerial preference for pessimism in short-horizon forecasts. Using data from various sample periods, alternative model specifications, and various measures of earnings unpredictability, we find that pessimism, not optimism, in short-horizon forecasts is associated with increasingly unpredictable earnings. Our results suggest that firms can more effectively manage analysts’ earnings expectations downward when earnings are relatively unpredictable.
The information content of financial analysts' forecasts of earnings
Journal of Accounting and Economics, 1979
The paper assesses the information content of revisions in financial analysts' forecasts of earnings by analyzing the relation between the direction of these revisions and stock price behavior. Abnormal returns during the months surrounding the revisions in analysts' forecasts are computed and evaluated. The results strongly indicate that information on revisions in forecasts of earnings per share is valuable to investors. It is also suggested that market reaction to the disclosure of analysts' forecasts is relatively slow and gives rise to potential abnormal returns to investors who act upon this type of publicly available information.