Predicting Sell-Side Analysts' Relative Earnings Forecast Accuracy When It Matters Most

2017 ◽  
Author(s):  
Niklas Bllmke
Keyword(s):  
Forecast Accuracy ◽  
Earnings Forecast ◽  
Relative Earnings

Does Forecast Accuracy Matter to Security Analysts?

1999 ◽  
Vol 74 (2) ◽  
pp. 185-200 ◽  
Author(s):  
Michael B. Mikhail ◽  
Beverly R. Walther ◽  
Richard H. Willis
Keyword(s):  
Forecast Accuracy ◽  
Earnings Forecast ◽  
Statistical Relation ◽  
Security Analysts ◽  
Forecast Horizon ◽  
Stock Recommendations ◽  
Period Effects ◽  
Time Period ◽  
Turn Over ◽  
Relative Profitability

We investigate if earnings forecast accuracy matters to security analysts by examining its association with analyst turnover. Controlling for firm- and time-period effects, forecast horizon and industry forecasting experience, we find that an analyst is more likely to turn over if his forecast accuracy is lower than his peers. We find no association between an analyst's probability of turnover and his absolute forecast accuracy. We also investigate another observable measure of the analyst's performance, the profitability of his stock recommendations. There is no statistical relation between the absolute or relative profitability of an analyst's stock recommendations and his probability of turnover. We interpret our findings as indicating that forecast accuracy is important to analysts.

The Moderating Effect of Industry Concentration on the Relations Between External Attributes and the Properties of Analyst Earnings Forecast

2013 ◽  
Vol 16 (03) ◽  
pp. 1350019 ◽  
Author(s):  
Yu-Cheng Chen ◽  
Chiung-Yao Huang ◽  
Pei-I Chou
Keyword(s):  
Forecast Accuracy ◽  
Earnings Forecasts ◽  
Moderating Effect ◽  
Industry Concentration ◽  
Earnings Forecast ◽  
Moderating Effects ◽  
Forecast Dispersion ◽  
Earnings Surprise ◽  
Using Data ◽  
Analyst Earnings

Based on the work of earlier studies, the main objective of this study is to determine whether the properties of analyst earnings forecast are related to the interaction effects of external attributes and industry concentration that were not the focus of previous research. Specifically, this study examines the relations between external attributions and the properties of analyst earnings forecasts. Furthermore, we explore the moderating effect of industry concentration on the relations between external attributions and the properties of analyst earnings forecasts. Using data from Compustat and I/B/E/S, we provide evidence that analysts' earnings forecast accuracy is lower and the forecast dispersion is larger for firms with more earnings surprise. Firms with more analysts' forecasts covering are associated with higher forecast accuracy, but not necessarily higher forecast dispersion. The moderating effects of industry concentration on the relationships between earnings surprise, the number of estimates covering the company and forecast accuracy are particularly strong. In addition, the moderating effects of industry concentration on the relationship between earnings surprise, the number of estimates covering the company and the forecast dispersion are partially supported. Overall, the industrial concentration factor either magnifies or alleviates the effect of external attributions on analyst's forecast accuracy and forecast dispersion.

scholarly journals Earnings Forecast Optimism For U.S. Vs. Non-U.S. Firms

2013 ◽  
Vol 12 (11) ◽  
pp. 1491
Author(s):  
David Salerno ◽  
Nathan Jeppson
Keyword(s):  
Task Complexity ◽  
Financial Analysts ◽  
Forecast Accuracy ◽  
Earnings Forecasts ◽  
International Investment ◽  
Growth Potential ◽  
Earnings Forecast ◽  
Level Measurement ◽  
Investment Opportunities

This study examines whether financial analysts are more optimistic in their earnings forecasts for non-U.S. firms than they are for U.S. firms. Several areas of research motivate this examination. First, research shows that global economic influences, such as economic downturns and the desire to increase the international content of portfolios, encourage investors to seek out international investment opportunities in new markets. Second, literature also reveals that emerging markets provide superior growth potential; however, analyzing such firms could introduce task complexity which research finds to be associated with lower forecast accuracy. Finally, research shows that financial analysts cover firms of which they have a favorable opinion. Therefore, because of this literature, it is reasonable to expect that analysts make more optimistic forecasts (over-estimate errors) of the earnings potential of the non-U.S. firms that they choose to follow vs. U.S. firms. Using a summary level measurement of forecast optimism, the authors find that analysts forecasts are more optimistic for non-U.S. firms over both short and long-term horizons. In analyst-level tests, it was found that individual analysts produce more optimistic forecasts for non-U.S. firms in relation to their peers in the long-term; however, that optimism is reduced under short horizons. As portfolios become more internationally diversified, the result of this study will be useful to investors seeking analyst guidance about international investment opportunities.

Which Analysts Benefited Most from Mandatory IFRS Adoption in Europe?

2017 ◽  
Vol 16 (3) ◽  
pp. 171-190 ◽  
Author(s):  
Christof Beuselinck ◽  
Philip P. M. Joos ◽  
Inder K. Khurana ◽  
Sofie van der Meulen
Keyword(s):  
Forecast Accuracy ◽  
High Variability ◽  
Earnings Forecast ◽  
The European Union ◽  
Listed Firms ◽  
Reporting Practices ◽  
Ifrs Adoption ◽  
One Year ◽  
First Time ◽  
Research Structure

ABSTRACT This study examines whether financial analysts' research structure and portfolio selection choices helped in improving relative earnings forecast accuracy around mandatory IFRS adoption in Europe. Using a sample of 68,665 one-year ahead forecasts for 1,980 publicly listed firms, we find that market-wide mandatory IFRS adoption in the European Union resulted in a significant improvement in the relative forecast accuracy of sector specialists compared to generalists, while country specialists retained a relative accuracy advantage independent of the period of study. Moreover, sector specialists outperformed generalists especially for firms with large local GAAP to IFRS income reconciliations in the first-time IFRS adoption year and when analysts' research portfolios prior to IFRS adoption exhibited high variability in local GAAP reporting practices. Additional analysis indicates that IFRS enabled analysts to initiate coverage of more firms, especially smaller ones, in their sector of specialization. Overall, our results are consistent with the notion that mandatory IFRS adoption in Europe reduced information processing costs and enlarged the within-industry valuation scope. JEL Classifications: G15; M41.

Audit Quality and Properties of Analyst Earnings Forecasts

2008 ◽  
Vol 83 (2) ◽  
pp. 327-349 ◽  
Author(s):  
Bruce K. Behn ◽  
Jong-Hag Choi ◽  
Tony Kang
Keyword(s):  
Financial Reporting ◽  
Audit Quality ◽  
Forecast Accuracy ◽  
Reporting Quality ◽  
Earnings Forecasts ◽  
Earnings Forecast ◽  
Forecast Dispersion ◽  
Industry Specialization ◽  
Big 5 ◽  
Analyst Earnings

Under the assumption that audit quality relates positively to unobservable financial reporting quality, we investigate whether audit quality is associated with the predictability of accounting earnings by focusing on analyst earnings forecast properties. The evidence shows that analysts' earnings forecast accuracy is higher and the forecast dispersion is smaller for firms audited by a Big 5 auditor. We further find that auditor industry specialization is associated with higher forecast accuracy and less forecast dispersion in the non-Big 5 auditor sample but not in the Big 5 auditor sample. Overall, our results suggest that high-quality audit provided by Big 5 auditors and industry specialist non-Big 5 auditors is associated with better forecasting performance by analysts.

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