UK Analysts' Earnings Forecasts

This paper reports the results of an empirical study of UK analysts' earnings forecasts for 126 firms for the years 1980 and 1981. Six hypotheses regarding the accuracy of these forecasts are tested, with results which both confirm and conflict with prior UK findings. In addition, evidence is found of a greater than generally attributed sensitivity of test results to the measure of accuracy used.     

Stock Market Returns and Inflation Forecasts

This study uses data from the Livingston survey of expectations to examine the Fisher hypothesis as a model relating expected stock returns and expected inflation. We show that the Fisher hypothesis holds much better for ex ante expectations than ex post realizations.     

Dispersion of Financial Analysts' Earnings Forecasts and the (Option Model) Implied Standard Deviations of Stock Returns

This study examines whether the information implied by simultaneous levels of option and stock prices (specifically, the implied standard deviation of returns) reflects other contemporaneously available information. The independent contemporaneous measure considered is the observed dispersion (across several financial analysts), at a point in time, in the forecasts of earnings per share for a given firm. The results indicate that implied standard deviations clearly reflect the contemporaneous dispersion in analysts' forecasts incrementally, i.e., beyond the information contained in the historical time series of returns.     

股票回购、信息透明度与分析师预测研究

本文以2005—2016年发生社会公众股股票回购的上市公司为对象,研究股票回购对证券分析师预测的影响。结果显示:分析师充分关注了上市公司的股票回购行为,且股票回购数量越多、回购比例越大,分析师的关注度就越大,其乐观预测偏差也越大。进一步研究发现,信息透明度越高的公司中,分析师乐观预测偏差受到股票回购的负面影响越小。本文的结论为研究股票回购对分析师预测行为及其结果提供了经验证据,有利于促进资本市场投资者理性看待上市公司股票回购行为。     

The Implications of Dispersion in Analysts' Earnings Forecasts for Future ROE and Future Returns

Dispersion in analysts' forecasts is empirically evaluated by associating dispersion with a firm's future accounting rate of return-on-equity (ROE) and future returns. Forecast dispersion is significantly and negatively associated with future ROE, consistent with the notion that firm disclosures and analysts' information acquisition efforts increase as firm prospects improve. Forecast dispersion is negatively associated with future returns. This appears due to the implications of dispersion for future ROE, and suggests that the market does not immediately assimilate the information contained in forecast dispersion. Dispersion also conveys information about firm-specific risk not captured by beta and firm size.     

An Examination of Alternative Factor Models in UK Stock Returns

This paper examines the mean-variance efficiency of a number offactor models in UK stock returns. The paper also explores, using theapproach of MacKinlay (1995), whether missing risk factors ornonrisk-based explanations best explain the pricing errors of thedifferent factor models. The evidence in the paper suggests that themean-variance efficiency of each factor model is rejected and missing riskfactors are unable to explain the pricing errors of any of the models.Some nonrisk-based explanations, which posit a wide spread in abnormalreturns, may be a more plausible source of explaining the pricing errorsof the factor models.     

Analyst Forecasts and the Cross Section of European Stock Returns

We examine revisions to earnings forecasts by equity analysts and their role in predicting stock returns. We provide evidence that European stocks with net upward revised forecasts earn higher future returns than otherwise similar stocks. This effect is not concentrated in small stocks, stocks with low analyst coverage, or stocks with low book‐to‐market ratios. We find differences in the return continuation patterns of stocks with upward versus downward revisions, namely, bad news travels quickly, but good news travels slowly. This result is consistent with investors' attaching greater significance to poor earnings forecasts, but adopting a wait‐and‐see approach to good news.     

High-Technology Intangibles and Analysts' Forecasts

This study examines the association between firms' intangible assets and properties of the information contained in analysts' earnings forecasts. We hypothesize that analysts will supplement firms' financial information by placing greater relative emphasis on their own private (or idiosyncratic) information when deriving their earnings forecasts for firms with significant intangible assets. Our evidence is consistent with this hypothesis. We find that the consensus in analysts' forecasts, measured as the correlation in analysts' forecast errors, is negatively associated with a firm's level of intangible assets. This result is robust to controlling for analyst uncertainty about a firm's future earnings, which we also find to be higher for firms with high levels of internally generated (and expensed) intangibles. Given that analyst uncertainty increases and analyst consensus decreases with the level of a firm's intangible assets, we also expect and find that the degree to which the mean forecast aggregates private information and is more accurate than an individual analyst's forecast increases with a firm's intangible assets. Finally, additional analysis reveals that lower levels of analyst consensus are associated with high-technology manufacturing companies, and that this association is explained by the relatively high R&D expenditures made by these firms. Overall, our results are consistent with financial analysts augmenting the financial reporting systems of firms with higher levels of intangible assets (in terms of contributing to more accurate earnings expectations), particularly R&D-driven high-tech manufacturers.     

未预期货币政策与股票市场——基于媒体数据的实证研究

经济理论和各国经验表明,股票市场对货币政策操作的反应对货币政策的有效性以及金融稳定具有重要意义。本文基于媒体数据对货币政策预期和未预期部分进行了分解,应用事件研究法,考察了未预期货币政策对股票市场的影响,并探索了该影响的经济机制。分析表明:(1)未预期货币政策对沪深股市有显著的负向影响,1%的未预期降准会引起上证综指上涨0.806%,深证成指上涨0.831%。未预期基准利率调整的影响略大于准备金率调整;(2)货币政策对股票市场的影响存在非对称性,宽松货币政策对股市的影响大于紧缩货币政策;(3)货币政策对股票市场的影响主要通过影响预期未来超额收益实现。     

A Test of the Errors–in–Expectations Explanation of the Value/Glamour Stock Returns Performance: Evidence from Analysts' Forecasts

Several empirical studies show that investment strategies that favor the purchase of stocks with low prices relative to conventional measures of value yield higher returns. Some of these studies imply that investors are too optimistic about (glamour) stocks that have had good performance in the recent past and too pessimistic about (value) stocks that have performed poorly. We examine whether investors systematically overestimate (underestimate) the future earnings performance of glamour (value) stocks over the 1976 to 1997 period. Our results fail to support the extrapolation hypothesis that posits that the superior performance of value stocks is because investors make systematic errors in predicting future growth in earnings of out–of–favor stocks.     

Analysts' Forecasts and the Broker Relationship

Analysts' ability to forecast earnings per share has been the subject of considerable debate. A concern highlighted in previous research is the agency problem which may arise when analysts have a close working relationship with the firms for which they are providing forecasts. This paper provides evidence that this relationship does not improve the accuracy of the earnings forecasts, but stimulates optimistic forecasts. In addition, the paper examines whether firm size is a factor in forecast accuracy or bias.     

Confirming Management Earnings Forecasts, Earnings Uncertainty, and Stock Returns

In this study we examine the association among confirming management forecasts, stock prices, and analyst expectations. Confirming management forecasts are voluntary disclosures by management that corroborate existing market expectations about future earnings. This study provides evidence that these voluntary disclosures affect stock prices and the dispersion of analyst expectations. Specifically, we find that the market's reaction to confirming forecasts is significantly positive, indicating that benefits accrue to firms that disclose such forecasts. In addition, although we find no significant change in the mean consensus forecasts (a proxy for earnings expectations) around the confirming forecast date, evidence indicates a significant reduction in the mean and median consensus analyst dispersion (a proxy for earnings uncertainty). Finally, we document a positive association between the reduction of dispersion of analysts' forecasts and the magnitude of the stock market response. Overall, the evidence suggests that confirming forecasts reduce uncertainty about future earnings and that investors price this reduction of uncertainty.     

The Empirical Distribution of UK and US Stock Returns

There is now substantial evidence that daily equity returns are not normally distributed but instead display significant leptokurtosis and, in many cases, skewness. Considerable effort has been made in order to capture these empirical characteristics using a range of ad hoc statistical distributions. In this paper, we investigate the distribution of daily, weekly and monthly equity returns in the UK and US using two very flexible families of distributions that have been recently introduced: the exponential generalised beta (EGB) and the skewed generalised- t (SGT). These distributions permit very diverse levels of skewness and kurtosis and, between them, nest many of the distributions previously considered in the literature. Both the EGB and the SGT provide a very substantial improvement over the normal distribution in both markets. Moreover, for daily returns, we strongly reject the restrictions on the EGB and SGT implied by most of the distributions that are commonly used for modelling equity returns, including the student- t , the power exponential and the logistic distributions. Instead, our preferred distributions for daily returns are the generalised- t for the US and the skewed- t for the UK, both of which are members of the SGT family. For weekly returns, our preferred distributions are the student- t for the UK and the skewed- t for the US, while for monthly returns, our preferred distributions are the EBR12 for the UK and the logistic for the US. We consider the implications of our findings for the implementation of value-at-risk, a risk management methodology that rests heavily on the distributional characteristics of returns.     

Rational Expectations and Security Analysts' Earnings Forecasts

This paper investigates the rationality of security analysts' forecasts. The forecasts of analysts participating in Lynch, Jones, and Ryan's Institutional Brokers Estimate System (I/BE/S) data base are evaluated relative to past values of their own forecast errors, past values of forecasted earnings per share, and quarterly percentage changes in publicly available macroeconomic and financial time series. The publicly available series include the consumer price index, unemployment rate, oil prices, stock prices, gross national product, and corporate profits. The authors conduct a generalized orthogonality test and include only information available to analysts at the time the forecasts are made. The empirical results reject analyst forecast rationality, but not without exception.     

Examination of Conditional Asset Pricing in UK Stock Returns

I examine the empirical performance of various specifications of the capital asset pricing model (CAPM) in UK stock returns, using the stochastic discount framework. When the proxy for the market portfolio includes a proxy for labor income growth in addition to the stock market index, the performance of the CAPM improves. The improvement in performance shows in the magnitude and significance of the pricing errors and in the reduced impact of asset characteristics and other factors in the pricing of assets. There is further improvement when I use conditional versions of the models.     

A Note on the Predictability of UK Stock Returns

This note presents evidence on the predictability of UK stock returns using a database of companies in the FTSE-Allshare Index newly constructed towards the beginning of 1998. The tests used are autocorrelations at various lags and variance ratios for several aggregations of base observations. The evidence is consistent with that published for US stock returns, namely that daily stock returns contain a strong element of predictability.     

UK Stock Returns and the Impact of Domestic Monetary Policy Shocks

Abstract:  We investigate the influence of changes in UK monetary policy on UK stock returns and the possible reasons behind such a response. Firstly, we conduct an event study to assess the impact of unexpected changes in monetary policy on aggregate and sectoral stock returns. The decomposition of unexpected changes in the policy rate is based on futures markets data. Secondly, using a variance decomposition in the spirit of Campbell (1991) we attempt to identity the channels behind the response of stock returns to monetary policy surprises. The variance decomposition results indicate that the monetary policy shock leads to a persistent negative response in terms of future excess returns for a number of sectors.     

The Relevance of Analysts' Earnings Forecasts in Japan

Abstract:   This study examines the role of financial analysts in equity valuation in Japan by comparing the relevance of financial analysts' earnings forecasts, over financial statement information, to investors' decisions. We find that the value‐relevance of a set of accounting variables is very modest, but the incremental contribution of analysts' forecasts is very significant. This is in line with the expectation that the skill and expertise of analysts are more valuable in markets with poor financial disclosure, such as Japan. We also find that the importance of the financial statements increases over time while the importance of the analysts' forecasts does not change. We also provide evidence of the effect of Japanese corporate groupings, keiretsu, on the informativeness of accounting signals and earnings forecasts. The results show that the contribution of accounting variables to valuation is lower for keiretsu firms, which supports the exclusionary hypothesis that companies which are a part of keiretsu, disclose less information than do non‐keiretsu companies. The analysts' forecasts are equally important for investors in both types of firms.