Earnings forecast bias - a statistical analysis

The evaluation of the reliability of analysts' earnings forecasts is an important aspect of research for different reasons: Many empirical studies employ analysts' consensus forecasts as a proxy for the market's expectations of future earnings in order to identify the unanticipated component of earnings, institutional investors make considerable use of analysts' forecasts when evaluating and selecting individual sharesand the performance of analysts' forecasts sheds light on the process by which agents form expectations about key economic and financial variables. The recent period put forward a well-known phenomenon, namely the existence of a positive bias in experts' anticipations: the latter tend to over-estimate earnings. In this paper, we study the properties of this bias according to various aspects, that is to say according to country, sector, but also according to the size of the companies.earnings forecasts, bias, consensus

Can earnings forecasts be improved by taking into account the forecast bias?

The recent period has highlighted a well-known phenomenon, namely the existence of a positive bias in experts' anticipations. Literature on this subject underlines optimism in the financial analyst community. In this work, our significant contributions are twofold: we provide explanatory bias prediction models which will subsequently allow the calculation of earnings adjusted forecasts, for horizons from 1 to 24 months. We explain the bias using macroeconomic as well as sector and firm specific variables. We obtain some important results. In particular, the macroeconomic variables are statistically significant and their signs are coherent with the intuition. However, we conclude that the microeconomic variables are the main explanatory variables. From the forecast evaluation statistics viewpoints, the adjusted forecasts make it possible quasi-systematically to improve the forecasts of the analysts.Analysts Forecasts

Fractional cointegration between nominal interest rates and inflation: A re-examination of the Fisher relationship in the G7 countries

According to the Fisher hypothesis, the nominal interest rate is equal to the real interest rate, plus expected inflation. Results concerning the empirical validity of this hypothesis are not unanimous. These contradictions may be due to the fact that the usual concept of cointegration is too restrictive. We thus propose here to refer to the concept of fractional cointegration introduced by Granger (1986). We study the Fisher hypothesis by testing for the existence of a fractional cointegration relationship between nominal interest rates and inflation. Our results suggest that, for a large majority of G7 countries, such a relationship exists.

Analyse intraquotidienne de l'impact des « news » sur le marché boursier français

Intraday analysis of the news impact on the French stock market Abstract The purpose of this paper is to study the impact of public information on the French capital market. Analysis is conducted on intraday data concerning firms which belong both to CAC 40 (important capitalization) and MIDCAC (weak capitalization). Data cover the period January 1995 to December 1999. In order to put forward the impact of public information on stock prices, we apply two non-parametric tests: the threshold test and the run test. Our results show that earnings announcements, rumors and mergers and acquisitions operations have a great importance on stock prices. These various announcements have not been correctly anticipated since they have an important impact on stock prices. These conclusions question the efficient capital French market hypothesis in its semi-strong form

Oil prices and economic activity: An asymmetric cointegration approach

The aim of this paper is to study the long-term relationship between oil prices and economic activity, proxied by GDP. To account for asymmetries existing in the links between the two variables, we propose an approach based on asymmetric cointegration. Our empirical analysis concerns the U.S. economy, but also the G7, Europe and Euro area economies. Results indicate that, while standard cointegration is rejected, there is evidence for asymmetric cointegration between oil prices and GDP.

Les tests de mémoire longue appartiennent-ils au "camp du démon" ?

[fre] L'objet de cet article est de tester le type de la structure de dépendance des séries financières d'indices boursiers et de taux de change. A cette fin ont été mises en œuvre les procédures de détection de la mémoire longue que sont les analyses R/S et les diverses techniques ARFIMA. Le résultat particulièrement intéressant concerne les marchés canadiens pour lesquels nous décelons des phénomènes de persistance sur le marché des changes ($/$ canadien) et d'anti-persistance sur le marché boursier (TSE 300). [eng] The purpose of this paper is to test the dependence structure of financial series of stock returns and foreign exchange rates. To do this, R/S analysis and various ARFIMA methods have been implemented in order to detect the presence of long-term memory. The main result concerns Canadian markets for which we find persistence and anti-persistence phenomena in the foreign exchange market (dollar-Canadian dollar) and in the stock market (TSE 300) respectively.

Un modèle multifactoriel des spreads de crédit : estimation sur panels complets et incomplets

Amulti-factorial model of credit spreads : estimation using complete and incomplete panels. Credit risk is an important source of risk for most banks. While it has been inherent in their financial intermediation activity and identified for a long time, scientific methods for analysing and quantifying this type of risk have emerged only recently. This may be due to the complexity and unpredictability of the default event. The model proposes a tool for analysing and forecasting credit spreads that can help managers in their portfolio choices. Our approach is multi-factorial, attempting to explain changes in credit spreads. The study has been made using a panel of corporate bonds issued on the French market.Le risque de crédit est une source de risque importante pour la plupart des banques. Bien qu’il soit inhérent à leur activité d’intermédiation financière et identifié depuis longtemps, les méthodes d’analyse et d’évaluation du risque de crédit ne se sont développées que récemment. Cela est probablement dû à la complexité et au caractère imprévisible du défaut. Le modèle que nous présentons dans cette étude a pour objectif d’aider les gérants à prendre leurs décisions de portefeuille en leur fournissant un outil d’analyse et de prévision des spreads de crédit.Lardic Sandrine, Gauthier Claire. Un modèle multifactoriel des spreads de crédit : estimation sur panels complets et incomplets. In: Économie & prévision, n°159, 2003-3. pp. 53-69