An evaluation of Chinese macroeconomic forecasts

This article evaluates the quality of professional macroeconomic forecasts in China for the years 1995–2009. Using a large panel of forecasts on four macroeconomic variables (GDP, inflation, consumption and investment), we reject the hypothesis of unbiasedness, and find that forecasters have been, on average, overly pessimistic. The source of the bias lies primarily in forecasters' slow adjustment to structural shocks to the level of economic growth. We also reject the hypothesis that forecasters use information efficiently, and find that a large number of forecasters overreact to economic news. Finally, we document large differences of forecast accuracy across both forecasters and variables.     

The Relation between Market Values,Earnings Forecasts,and Reported Earnings*

Recently, much of the research into the relation between market values and accounting numbers has used, or at least made reference to, the residual income model (RIM). Two basic types of empirical research have developed. The “historical” type explores the relation between market values and reported accounting numbers, often using the linear dynamics in Ohlson 1995 and Feltham and Ohlson 1995 and 1996. The “forecast” type explores the relation between market value and the present value of the book value of equity, a truncated sequence of residual income forecasts, and an estimate of the terminal value at the truncation date. The analysis in this paper integrates these two approaches. We expand the Feltham and Ohlson 1996 model by including one‐ and two‐period‐ahead residual income forecasts to infer “other” information regarding future revenues from past investments and future growth opportunities. This approach results in a model in which the difference between market value and book value of equity is a function of current residual income, one‐ and two‐period‐ahead residual income, current capital investment, and start‐of‐period operating assets. The existence of both persistence in revenues from current and prior investments and growth in future positive net present value investment opportunities leads us to hypothesize a negative coefficient on the one‐period‐ahead residual income forecast and a positive coefficient on the two‐period‐ahead residual income forecast. Our empirical results strongly support our hypotheses with respect to the forecast coefficients.     

An Empirical Analysis of Analysts' Capital Expenditure Forecasts: Evidence from Corporate Investment Efficiency*

We examine whether the information conveyed in a relatively new analyst research output—capital expenditure (capex) forecasts—affects corporate investment efficiency. We find that firms with analyst capex forecasts exhibit higher investment efficiency. This effect is stronger when the forecasts are issued by analysts with higher ability or greater industry knowledge. Moreover, the effect of capex forecasts on investment efficiency varies with the signals they convey about future growth opportunities—positive-growth signals are more effective in reducing underinvestment, while negative-growth signals are more effective in reducing overinvestment. Cross-sectional tests suggest that these effects operate at least in part through both a financing channel and a monitoring channel. Taken together, our results suggest that analysts' capex forecasts convey useful information about firms' growth opportunities to managers and investors, which can facilitate efficient investment.     

LONG MEMORY IN THE VOLATILITY OF AN EMERGING FIXED‐INCOME MARKET: EVIDENCE FROM SOUTH AFRICA

This paper tests for long memory in volatility of fixed‐income returns; specifically, South Africa's local currency 10‐year government bond, given that the characterisation of stochastic long‐memory volatility is of interest and importance in portfolio and risk management. The long‐memory parameter is estimated using methods based on wavelets, which have gained prominence in recent years. Evidence of long memory in fixed‐income return volatility is conclusively demonstrated across a variety of volatility measures and wavelet forms. This finding suggests a pattern of time dependence, which may potentially be exploited to generate improved volatility forecasting performance especially over long horizons. This paper further extends the extant literature by comparing the predictive power of long‐memory forecasts with those obtained from a standard (short‐memory) generalised autoregressive conditional heteroskedasticity (GARCH) process. The results of this exercise suggest that the information content of long‐memory models does not lead to improved forecast accuracy. The GARCH(1,1) model is shown to provide the best forecasts across most horizons (i.e. daily, weekly and monthly). Forecast performance is further revealed to be sensitive to the choice of volatility proxy used. Finally, the derived volatility forecasts are generally very close, and in some cases, almost indistinguishable.     

Unintended Effects of Preannouncements on Investor Reactions to Earnings News*

This study uses an experiment to examine three alternative theoretical explanations for the unintended effects of preannouncements on investor reactions to earnings news. The theoretical explanations are cue consistency, recency effects, and diminishing marginal reactions. The experiment varies the amount of a management preannouncement at five different levels while holding constant consensus analyst expectations prior to the preannouncement and the subsequent earnings announcement. Participants provide preliminary forecasts of current‐ and next‐period earnings per share (EPS) prior to the preannouncement, after the preannouncement, and after the earnings announcement. The pattern of participants' final next‐year EPS forecasts and the results of follow‐up analyses appear most consistent with the predictions of diminishing marginal reactions and, to a somewhat lesser extent, cue consistency, suggesting that both mechanisms play a role in determining the effects of preannouncements. There is little evidence supporting recency effects. Finally, supplemental evidence indicates that participants are unaware that preannouncements influence their reactions to earnings news, suggesting that the effects are unintended. This study has implications for managers who make preannouncement disclosure decisions and for academics who wish to understand and interpret prior research on earnings preannouncements.     

Earnings Forecasts and Price Efficiency after Earnings Realizations: Reduction in Information Asymmetry through Learning from Price*

When information asymmetry is a major market friction, earnings forecasts can lead to higher price efficiency even after the information in forecasts completely dissipates upon earnings realizations. We show this in an experimental market that features information asymmetry (i.e., some traders possess differential private information). Earnings forecasts reduce information asymmetry and lead to prices that reflect a greater amount of private information. Traders can learn more about others' information from prices. This information learned from past prices continues to reduce information asymmetry and improve price efficiency even after earnings realizations. We contribute to the disclosure literature by showing the evidence that the learning‐from‐price effect amplifies the impact of public disclosure on price efficiency.     

Earnings Management to Avoid Losses and Earnings Decreases: Are Analysts Fooled?*

This paper explores whether analyst forecasts impound the earnings management to avoid losses and small earnings decreases documented in Burgstahler and Dichev 1997, whether analysts are able to identify which specific firms engage in such earnings management, and the implications for significant forecast error anomalies at zero earnings and zero forecast earnings. We use data from Zacks Investment Research 1999 and find that analysts anticipate earnings management to avoid small losses and small earnings decreases. Further, analysts are much more likely to forecast zero earnings than firms are to realize zero earnings, and analysts are unable to consistently identify the specific firms that engage in earnings management to avoid small losses. This latter inability contributes to significant forecast pessimism associated with zero reported earnings and significant forecast optimism associated with zero earnings forecasts.     

Forecast accuracy of the Japanese government: Its year-ahead GDP forecast is too optimistic

This paper evaluates accuracy and efficiency of the real GDP forecasts made by the Japanese government over the past 22 years. The government's 16-months-ahead forecast has upward bias of 0.7 percentage points, and is significantly inferior to the mean forecast of private institutions or a vector autoregression forecast that uses real-time data only. Moreover, the government forecast is inferior to these benchmark forecasts not only in the ‘recessionary’ 1990s but also in the ‘prosperous’ 1980s. This result casts serious doubt on the assertion that the government intentionally produced inaccurate forecasts in time of recession.     

“近水楼台先得月”吗？——来自分析师调研的经验证据

分析师实地调研对其盈余预测会产生很大影响，那么，在调研中，分析师接触到更高管理层，对其盈余预测的影响是正向还是负向呢？我们以2015-2018年深交所被分析师调研的上市公司为例，研究发现，分析师实地调研受到管理层重视的程度越高，分析师盈余预测准确度越低，同时预测乐观度越高。进一步的研究表明，公司的盈余波动程度以及调研获取的私有信息的时效性也会影响管理层重视对分析师预测的作用效果。研究结果说明对于分析师实地调研来说，“近水楼台”反而影响了其“先得月”。文章的研究深化了分析师行为的相关文献，给资本市场的监管制度提供了一些政策建议。     

Horizon‐Dependent Underreaction in Financial Analysts' Earnings Forecasts*

This paper provides empirical evidence that underreaction in financial analysts' earnings forecasts increases with the forecast horizon, and offers a rational economic explanation for this result. The empirical portion of the paper evaluates analysts' responses to earnings‐surprise and other earnings‐related information. Our empirical evidence suggests that analysts' earnings forecasts underreact to both types of information, and the underreaction increases with the forecast horizon. The paper also develops a theoretical model that explains this horizon‐dependent analyst underreaction as a rational response to an asymmetric loss function. The model assumes that, for a given level of inaccuracy, analysts' reputations suffer more (less) when subsequent information causes a revision in investor expectations in the opposite (same) direction as the analyst's prior earnings‐forecast revision. Given this asymmetric loss function, underreaction increases with the risk of subsequent disconfirming information and with the disproportionate cost associated with revision reversal. Assuming that market frictions prevent prices from immediately unraveling these analyst underreac‐tion tactics, investors buying (selling) stock on the basis of analysts' positive (negative) earnings‐forecast revisions also benefit from analyst underreaction. Therefore, the asymmetric cost of forecast inaccuracy could arise from rational investor incentives consistent with a preference for analyst underreaction. Our incentives‐based explanation for underreaction provides an alternative to psychology‐based explanations and suggests avenues for further research.     

如何协调农村民间借贷与正规金融涉农融资的关系

当前,农村民间借贷和正规金融涉农融资是农民取得借款的两大主要来源。文章从未来银行业的发展趋势的角度预测农村融资的走向,深入分析农村民间借贷与正规金融涉农融资两者的关系,认为在引导农村非正规金融发展的过程中,务必培育农村正规金融机构,扩展正规金融支农融资渠道,双管齐下,才是最终实现金融支农的正确选择,一味追求农村非正规金融的发展,并不能真正解决农民融资难问题。     

An analysis of RSQE forecasts: 1971–1992

The purpose of this paper is to evaluate the accuracy of ex ante econometric model forecasts of four key macroeconomic variables: real GNP growth, the rate of price inflation measured by the GNP deflator, the civilian unemployment rate, and the Treasury Bill rate. Annual forecasts produced by the Research Seminar in Quantitative Economics (RSQE) based on the Michigan Quarterly Econometric Model of the U.S. Economy are compared with quasi ex ante forecasts from a four-variable vector autoregressive (VAR) model. Statistical tests of the equality of forecast error variances as well as univariate and multivariate forecast encompassing-type tests are conducted. The forecast error variance comparisons indicate that for three of the four variables the RSQE forecasts are more accurate than the VAR forecasts and for one of the variables (real GNP growth) only slightly less accurate. The forecast encompassing-type tests indicate that the RSQE forecasts contain information not contained in the VAR forecasts and, conversely, that VAR forecasts contain information not included in the RSQE forecasts. The scope for improving RSQE forecasts by combining them with VAR forecasts is rather limited, however.     

The Relation between Analysts' Forecasts of Long‐Term Earnings Growth and Stock Price Performance Following Equity Offerings*

In this paper we evaluate the role of sell‐side analysts' long‐term earnings growth forecasts in the pricing of common equity offerings. We find that, in general, sell‐side analysts' long‐term growth forecasts are systematically overly optimistic around equity offerings and that analysts employed by the lead managers of the offerings make the most optimistic growth forecasts. In additional, we find a positive relation between the fees paid to the affiliated analysts' employers and the level of the affiliated analysts' growth forecasts. We also document that the post‐offering underperformance is most pronounced for firms with the highest growth forecasts made by affiliated analysts. Finally, we demonstrate that the post‐offering underperformance disappears once we control for the overoptimism in earnings growth expectations. Thus, the evidence presented in this paper is consistent with the “equity issue puzzle” arising from overly optimistic earnings growth expectations held at the time of the offerings.     

Earnings Announcement Disclosures and Changes in Analysts' Information

This study examines how financial disclosures with earnings announcements affect sell‐side analysts' information about future earnings, focusing on disclosures of financial statements and management earnings forecasts. We find that disclosures of balance sheets and segment data are associated with an increase in the degree to which analysts' forecasts of upcoming quarterly earnings are based on private information. Further analyses show that balance sheet disclosures are associated with an increase in the precision of both analysts' common and private information, segment disclosures are associated with an increase in analysts' private information, and management earnings forecast disclosures are associated with an increase in analysts' common information. These results are consistent with analysts processing balance sheet and segment disclosures into new private information regarding near‐term earnings. Additional analysis of conference calls shows that balance sheet, segment, and management earnings forecast disclosures are all associated with more discussion related to these items in the questions‐and‐answers section of conference calls, consistent with analysts playing an information interpretation role with respect to these disclosures.     

基于GM（1，1）的四川生猪及猪肉生产预测分析

在四川生猪养殖及猪肉生产现状进行分析的基础上,利用1989—2006年度四川省生猪和猪肉相关数据,运用GM（1,1）建立了生产模型并进行了预测。最后提出了加强四川生猪生产的对策和建议。     

Expectations Management and Beatable Targets: How Do Analysts React to Explicit Earnings Guidance?*

This study investigates security analysts' reactions to public management guidance and assesses whether managers successfully guide analysts toward beatable earnings targets. We use a panel data set between 1995 and 2001 to examine the fiscal‐quarter‐specific determinants of management guidance and the timing, extent, and outcomes of analysts' reactions to this guidance. We find that management guidance is more likely when analysts' initial forecasts are optimistic, and, after controlling for the level of this optimism, when analysts' forecast dispersion is low. Analysts quickly react to management guidance and are more likely to issue final meetable or beatable earnings targets when management provides public guidance. Our evidence suggests that public management guidance plays an important role in leading analysts toward achievable earnings targets.     

Structural Reform and Transparency in a Monetary Union

We assess how central bank transparency affects the incentives for labour market reform in a monetary union. We introduce transparency as affecting unemployment forecasts that provide information that the central bank has to the private sector and the governments. Under conditions of monetary policy opaqueness and inflation bias, we show that monetary union may induce more reform (as governments mitigate inflation surprises under idiosyncratic shocks), albeit to a lesser extent when inflation bias is only present at the national level. In the absence of inflation bias, central bank transparency, by eliminating inflation surprises in the face of idiosyncratic shocks, induces less reform in a currency union relative to monetary autonomy. Altogether, these results point to the need for a strong political commitment to reform so that member states benefit most from the combination of a credible and transparent single monetary policy with measures aimed at improving competitiveness and enhancing long-term growth.     

The Macro Forecasting Record of the Indonesian Financial Authorities, 2004–15

A precondition for financial authorities’ macroeconomic effectiveness is a capacity to foresee economic conditions with reasonable accuracy. This article analyses the performance of Bank Indonesia (the central bank) and Indonesia’s Ministry of Finance in forecasting real GDP growth and consumer inflation over the last decade or so. It compares the quality of their forecasts with those of international institutions, aligning the timing of these forecasts to maximise comparability. Overall, the Indonesian authorities—especially the Ministry of Finance, in its revised central government budget (APBN-P)—perform respectably against their international comparators and there is no statistically significant bias in any of the forecasts. Still, there are mild indications of an optimistic bias in forecasts of inflation and growth, and all institutions tend to miss growth slowdowns. The results raise doubts about the value of fiscal policy for near-term macro stabilisation in Indonesia. Likewise, a wide range of uncertainty in forecasting inflation complicates the use of monetary policy for inflation targeting, at least one year ahead.     

Bias and Accuracy of Management Earnings Forecasts: An Evaluation of the Impact of Auditing*

This paper assesses how the bias and accuracy of managers' earnings forecasts in prospectuses were affected by a 1989 regulation that required the forecasts to be audited by public accountants. Theory suggests that auditors' association with the forecasts would reduce positive (optimistic) bias, by reducing moral hazard. Regulators expected that the audit requirement would also improve the accuracy of the forecasts. Both predictions were tested using management earnings forecasts disclosed in prospectuses of Canadian initial public offerings. The results show that audited forecasts contained significantly less positive bias than reviewed forecasts, but there was only a marginally significant improvement in accuracy.     

THE RELATIONSHIP BETWEEN SAVING AND GROWTH IN SOUTH AFRICA: A TIME SERIES ANALYSIS

This paper uses the Johansen VECM estimation technique to examine the directions of association between saving and growth in South Africa over the period 1946–1992. We examine the aggregate private saving rate and its interaction with investment and growth. The paper finds that the private saving rate has a direct, as well as, an indirect effect on growth. The indirect effect is through the private investment rate. In turn, we find that growth has a positive effect on the private saving rate. The extent of this effect is determined by liquidity constraints. Thus, we have a virtuous cycle, as growth enhances saving, which in turn further enhances growth.