How to Measure Analyst Forecast Effort

Abstract

We introduce a new way to measure the forecast effort that analysts devote to their earnings forecasts by measuring the analyst's general effort for all covered firms. While the commonly applied effort measure is based on analyst behaviour for one firm, our measure considers analyst behaviour for all covered firms. Our general effort measure captures additional information about analyst effort and thus can identify accurate forecasts. We emphasise the importance of investigating analyst behaviour in a larger context and argue that analysts who generally devote substantial forecast effort are also likely to devote substantial effort to a specific firm, even if this effort might not be captured by a firm-specific measure. Empirical results reveal that analysts who devote higher general forecast effort issue more accurate forecasts. Additional investigations show that analysts' career prospects improve with higher general forecast effort. Our measure improves on existing methods as it has higher explanatory power regarding differences in forecast accuracy than the commonly applied effort measure. Additionally, it can address research questions that cannot be examined with a firm-specific measure. It provides a simple but comprehensive way to identify accurate analysts.     

On policymakers’ loss functions and the evaluation of early warning systems: Comment

Sarlin (2013) suggests that if a loss function approach is chosen to derive the optimal threshold for financial crisis early warning indicators, the loss function specification should explicitly take into account the unconditional sample crisis probability. In this comment we argue that this approach is not robust to small perturbations of the preference parameter and is not easy to use for policy purposes. We suggest therefore to continue using a simpler loss function specification.     

Endogenous Sunk Costs, Flexible Manufacturing and the Productivity Effects of International Trade

The paper addresses the productivity effects of international trade in the presence of flexible manufacturing and endogenous sunk costs (cost-reducing R&D). It shows that international trade raises R&D expenditures, but this will not necessarily boost productivity because of possibly counteracting market structure effects. The analysis is conducted in general equilibrium so that implications for real wages and welfare can also be addressed. Both can fall when trade leads to excessive R&D investment.     

Monetary union or currency competition? Currency arrangements for monetary stability in East and West

Recent events in the European Monetary System on the one hand and monetary disintegration in the former Soviet Union on the other hand have revived interest in the question of how to design and choose a monetary regime for both parts of Europe that ensures monetary stability. The objective of monetary stability can be achieved either by complete monetary union or by currency competition. Building on Hayek's ideas, I argue that both regimes are viable solutions depending on the circumstances. The paper first focuses on the misperceived benefits of flexible exchange rates, making the case for monetary union in Western Europe. However, monetary union is no alternative for Eastern Europe and the former Soviet Union. Instead currency competition could be used to retain the benefits of flexible exchange rates and to foster monetary stability at the same time.     

Altruism,Warm Glow and the Willingness-to-Donate for Green Electricity: An Artefactual Field Experiment

The ongoing liberalization of electricity markets in most western countries forms the background of our artefactual field experiment. Using a Cheap talk design [R.G. Cummings and L.O. Taylor. American Economic Review 89 (1999) 649–665] with supplementary monetary incentives, we test for presence of “warm glow” motivations [J. Andreoni. Journal of Political Economy 97 (1989) 1447–1458; Economic Journal 100 (1990) 464–477] in the willingness-to-donate for electricity generated from renewables. Our data from 200 participants supports impure altruism, that is, individuals benefit from both contributing to environmental quality and its current level when opting in favor of green electricity. Furthermore, we find evidence of crowding-out as well as crowding-in effects. Depending on the knowledge of people about electricity markets and the types of electricity contracts offered, “all-or-none” contracts are most likely to bring about crowding-out effects.     

Income-Related Biases in International Trade: What Do Trademark Registration Data Tell Us?

Rich countries trade more among themselves than with poor economies due to a closer match of exporter supply structures and importer preferences. In the literature, the closeness of supply and demand has traditionally been determined by the quality of products—as expressed in the Linder hypothesis. This paper examines an extension of the hypothesis by considering the extent of brand differentiation as another determinant of the closeness of supply and demand. The analysis employs information on international trademark registrations to test whether richer countries import more from countries exporting products of higher quality and greater brand differentiation. The hypothesis is confirmed in most consumer goods sectors. JEL no. F 10, O 34     

Economic and environmental impacts of the Kyoto Protocol

Abstract In 2003 the Kyoto Protocol, which imposes legally binding greenhouse gas emission constraints on industrialized countries, is likely to enter into force. The Protocol has been celebrated as a milestone in climate protection, but standard economic theory casts doubt that it will go beyond symbolic policy. In this paper, we show that the final concretion of the Kyoto Protocol is consistent with the theoretical prediction: Kyoto more or less boils down to business‐as‐usual without significant compliance costs to ratifying parties. JEL Classification: D58, Q43, Q58
Conséquences économiques et environnementales du protocole de Kyoto En 2003, le protocole de Kyoto, qui impose aux pays industrialisés l'obligation de réduire leurs émissions de gaz à effet de serre, entrera probablement en vigueur. Si le protocole a été accueilli comme un grand pas en avant dans le combat pour protéger l'environnement, la théorie économique jette un regard sceptique sur la portée réelle d'un tel accord et le considére comme un geste symbolique. Dans ce mémoire, on montre que la concrétisation finale de l'accord de Kyoto s'arrime aux prédictions théoriques : Kyoto n'est rien de plus que « business‐as‐usual >> et n'impliquera pas de coûts significatifs pour les parties qui ont signé le protocole.     

Kennzahlenbasiertes Risikocontrolling in Industrie- und Handelsunternehmen

Risikocontrolling in Industrie- und Handelsunternehmen steht durch das Gesetz zur Kontrolle und Transparenz im Unternehmensbereich (KonTraG) im Fokus betriebswirtschaftlicher Forschung. Das Kon- TraG verlangt hier ein Risikocontrolling, ohne dabei Hinweise für dessen konkrete Ausgestaltung zu bieten. Die vorliegende Arbeit untersucht daher die Verwendung von Kennzahlen zur Risikoanalyse und risikoadjustierten Performancemessung. Im Zentrum steht die Entwicklung der Kennzahl „Corporate Value on Discounted Risk Value” (CVODRV), die sich besonders für das Risikocontrolling in Industrieund Handelsunternehmen eignet. Dort hat man es im Gegensatz zu Finanzinstitutionen h?ufig mit schlecht handelbaren Risiken zu tun, was der CVODRV in geeigneter Weise berücksichtigt.