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What Drives The Value Of Financial Analysts’ Advice? The Role Of Earnings And Growth Forecasts, Ohad Kadan, Leonardo Madureira, Rong Wang, Tzachi Zach
What Drives The Value Of Financial Analysts’ Advice? The Role Of Earnings And Growth Forecasts, Ohad Kadan, Leonardo Madureira, Rong Wang, Tzachi Zach
Research Collection Lee Kong Chian School Of Business
We offer a parsimonious index at the individual analyst level to measure the extent to which an analyst relies on earnings and long-term growth forecasts in producing her advice. Using this index, we evaluate the contribution of earnings and growth forecasts to the investment value of analysts’ stock recommendations. We find that the fraction of analysts’ advice attributed to forecasts varies considerably across analysts and sectors. The investment value of recommendations is higher for analysts who rely less on their forecasts and more on other sources of information when forming investment advice. Investors recognize the superiority of recommendations from analysts …
Robust Measures Of Earnings Surprises, Chin-Han Chiang, Wei Dai, Jianqing Fan, Harrison Hong, Jun Tu
Robust Measures Of Earnings Surprises, Chin-Han Chiang, Wei Dai, Jianqing Fan, Harrison Hong, Jun Tu
Research Collection Lee Kong Chian School Of Business
Event studies of market efficiency measure an earnings surprise with the consensuserror (CE), defined as earnings minus the average of professional forecasts. Even if asubset of forecasts can be biased, the ideal but difficult to estimate parameter-dependentalternative to CE is a nonlinear filter of individual errors that adjusts for bias. We showthat CE is a poor parameter-free approximation for this ideal measure. The fractionof misses on the same side (FOM), by discarding the magnitude of misses, offers a farbetterapproximation. FOM performs particularly well against CE in predicting thereturns of US stocks, where bias is potentially large, than that of international …