LA PROSSIMITÀ A CLUSTER INDUSTRIALI E L’ACCURATEZZA DELLE PREVISIONI DEGLI ANALISTI FINANZIARI

Questo studio analizza secondo una nuova prospettiva il problema dell’accuratezza delle previsioni emesse dagli analisti finanziari. L’ipotesi testata è che la prossimità fisica degli analisti a centri di specializzazione industriale costituisca un vantaggio informativo per gli stessi, migliorando l’accuratezza delle loro previsioni. In letteratura tale ambito di ricerca è nuovo e il lavoro si configura come una prima indagine esplorativa del tema. Selezionando quattro diversi settori (Farmaceutico, Bancario, Oil&Gas, Retail) e sei paesi europei (Francia, Germania, Italia, Svezia, Svizzera e Regno Unito), sono stati raccolti dati sia macroeconomici, per individuare i diversi centri di eccellenza, sia relativi agli analisti finanziari, alle loro previsioni e alla loro collocazione geografica. I risultati ottenuti sono in linea con le aspettative e mostrano che la collocazione geografica degli analisti finanziari rispetto ai centri di specializzazione industriale influenza l’accuratezza delle loro previsioni. I risultati suggeriscono inoltre che il grado con cui gli analisti usufruiscono di questo vantaggio informativo dipende, quantomeno in parte, dal livello di specializzazione degli stessi. Complessivamente, dunque, le evidenze empiriche confermano il beneficio di far parte di un network, sia esso formale o informale, dove le informazioni, la condivisione delle conoscenze e delle competenze maturate possono facilmente circolare

Financial Analysts' Forecast Accuracy: Do Valuation Methods Matter?

This study investigates how different ways to evaluate a company influence the accuracy of the target price. We know that finance theory and professional practice propose alternative approaches to the evaluation of a company. The literature on the relationship between the valuation methods used and target price accuracy is still scant, and the results are inconclusive and contradictory. Coding the valuation methods of 1,650 reports, we find that the accuracy of target prices decreases when the target price is based just on a main method. Furthermore, we show that methods based on company fundamentals and those based on market multiples lead to similar levels of accuracy. Among different classes of methods, there are no superior methods. Therefore, we argue that in order to improve forecast accuracy, analysts need to assess company value by choosing and applying a set of different methods, combining them and getting the average value, but regardless of the specific technique chosen

Risk Taking, Diversification Behavior and Financial Literacy of Individual Investors

This research investigates whether the financial literacy of individuals influences risk taking decisions and diversification behavior. This issue is relevant in that investors are increasingly in charge of their own financial security, but they have to deal with financial instruments whose increasing complexity often eventually prevents them from making conscious investment decisions. Prior empirical evidence shows that people are unable to perform a sophisticated portfolio diversification: what they do is to split equally their wealth among the asset classes available, in a naive way. We try to detect if the financial literacy is a driver of this kind of decisions. By submitting a questionnaire to 200 American individuals, we find that financial literacy plays a role in risk taking decisions, positively affecting how much risk individuals are willing to take. Moreover, only those who are literate in terms of diversification select less risky portfolios; the others merely increase their risk exposure, without managing it. Consistently with the previous literature, the strategy of diversification adopted by the literate ones is mainly naive. Instead, financial literacy turns out not being significant in explaining more sophisticated diversification strategies. As financial literacy affects positively the amount of risk taken by individuals, but only partially the diversification strategies pursued, there might be a dangerous pitfall in today's financial education programs promoted by governments and regulators, which, though they make investors more aware of their investment decisions, they eventually push them to assume more risks than they are able to manage. Two possible ways to tackle this issue could be: 1) to boost the financial literacy of the investors so as to make them able to use all the investment techniques required by the standard theory. This, however, seems difficult to obtain; 2) to promote advisory activity among investors. This may help them to apply the diversification principle in a sophisticated way

Proximity to Hubs of Expertise in Financial Analyst Forecast Accuracy

This paper investigates whether the geographical proximity of financial analysts to hubs of information and expertise can influence their forecasting accuracy. Recent studies show that the financial analyst forecasting process show a systematic difference in earnings forecast accuracy dependent on the geographical distance of analysts from the companies which they follow. The literature argues that local analysts issue more accurate forecasts because they have an informational advantage over analysts who are further away. Industrial centres can constitute important knowledge spillovers by creating formal and informal networks amongst firms and higher education and research institutions. In such a hub, information can easily flow and propagate. Our hypothesis is that physical proximity to these hubs, and not to the companies they follow, is an advantage for financial analysts, leading to the issue of more accurate forecasts. Using a sample of 205 observations related to 33 firms, across seven countries and ten sectors, our results are consistent with the hypothesis. Even though preliminary, and probably in part biased by sample selection issues, overall, the empirical evidence confirms the benefit of being part of a network, formal or informal, in which information, knowledge and expertise sharing can flow easily. We try to give some new evidence on what can cause variations in financial analyst accuracy by exploring these concepts, well known and analysed in other fields, but new in the context of financial analysts

REPORT DEGLI ANALISTI E IMPATTO DELLE VARIAZIONI DELLE RACCOMANDAZIONI E DEI TARGET PRICE: EVIDENZE SUL MERCATO ITALIANO

In questo lavoro esaminiamo la reazione del mercato a seguito della pubblicazione dei report emessi dagli analisti finanziari sulle società quotate in Italia contenenti un cambio di raccomandazione o di target price. I risultati mostrano come la reazione sia negativa in caso di downgrade e positiva in caso di upgrade, sia per i cambi di raccomandazione che di target price. La reazione è maggiore in valore assoluto per i downgrade piuttosto che per gli upgrade. Inoltre, quando i report riportano sia un cambio di raccomandazione sia un cambio di target price, la reazione è intensificata in caso di doppio upgrade o doppio downgrade. Nei casi in cui la direzione della revisione di raccomandazione è opposta a quella del target price, invece, i risultati suggeriscono che a prevalere sia l’informazione contenuta nel cambio di raccomandazione

MARKET REACTION AND PROPERTIES OF EQUITY ANALYSTS REPORTS

The paper collects and classifies the properties of more than 4600 analysts reports on Italian listed stocks in order to assess their impact on market reactions. The paper innovates the most common approach in the literature which resort mainly on information available on commercial database, such as the final recommendation and the earning forecasts. The findings show the market overlooks most of the properties it has been possible to collect and treat statistically. A part from that, the market looks at different reports properties depending on which are their final recommendation. When the reports make positive recommendation the market is not influenced at all by their content, while it is important their time issuing. The market reaction is stronger if the reports are issued when the frequency of the reports is lower. On the other hand, the reports with neutral and negative recommendations share the same features. The market reaction is stronger when the evaluation methods used to get the fair value estimation are elicited. This result indirectly confirms other previous studies. It could be explained through the disposition effect, that is the which tendency of investors to keep the stocks where they are suffering losses. The negative advice could reach investors both who are gaining and who are losing. While the former ones will be willing to sell, the latter ones, before selling the losing stocks, will require well documented reports with convincing arguments supporting the general advice