Accuracy, usefulness and the evaluation of analysts’ forecasts

Mozes, Haim A.

doi:10.1016/s0169-2070(02)00056-0

Cited by 41 publications

(19 citation statements)

References 26 publications

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“…Timeliness is a natural choice for investigation because it is both an important dimension of analyst research (Cooper et al 2001;Clement and Tse 2003;Mozes 2003;Mikhail et al 2006) and is negatively related to accuracy (Cooper et al 2001;Mozes 2003). That is, analysts who make more timely forecasts allow less timely analysts to incorporate the timelier earnings expectations into their own forecasts.…”

Section: Performance: Earnings Forecast Timelinessmentioning

confidence: 99%

“…Prior research has considered several measures of brokerage research timeliness (Cooper et al 2001;Mozes 2003;Clement and Tse 2003;Mikhail et al 2006). We measure timeliness using the ratio, T 0 /T 1 , where T 0 (T 1 ) is the cumulative number of days the N preceding (subsequent) forecasts lead (lag) the forecast of interest.…”

Section: Evaluation Of Team Forecasting Timelinessmentioning

confidence: 99%

“…We view the primary reason that teams outperform individuals with respect to timeliness to be their ability to subdivide their work; specifically, the gathering, filtering, and analyzing of relevant financial information. 15 An alternative construct related to both the accuracy and timeliness of earnings forecasting is ''usefulness,'' which measures the resolution of uncertainty with respect to a recent consensus (Mozes 2003;Williams 1996). In an untabulated analysis, we modify our performance model to include usefulness as the dependent variables and find that, relative to individual forecasts, team forecasts perform better on this earnings forecasting dimension.…”

Section: Variablementioning

confidence: 99%

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Team earnings forecasting

Brown

Hugon

2008

Rev Account Stud

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While brokerage houses use both teams of sell-side analysts and individual analysts to conduct earnings research, there is no empirical research examining whether teams and individuals differ with regard to their forecasting performance or purpose. We first examine the most-often researched dimension of forecasting performance, earnings forecast accuracy, and show that teams are less accurate than individual analysts in general and their own individual team members in particular. We conjecture that teams focus their efforts on an alternative dimension of forecasting performance, timeliness, and show that team forecasts are timelier than those of individual analysts in general and their own individual team members in particular. Consistent with the notion that teams trade-off forecast accuracy for timeliness to comply with a market research demand, we show that team forecast revisions are associated with larger market responses than those of individuals. Finally, we illuminate the nature of team assignments by documenting that the firms that teams follow are in greater financial distress and larger in size.

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Section: Performance: Earnings Forecast Timelinessmentioning

confidence: 99%

Section: Evaluation Of Team Forecasting Timelinessmentioning

confidence: 99%

Section: Variablementioning

confidence: 99%

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Team earnings forecasting

Brown

Hugon

2008

Rev Account Stud

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“…Lobo (1992) identifies the fact that a combination of time-series and analysts' forecasts are particularly useful where there is a high level of forecast dispersion, as well as a low number of analyst contributions to the consensus forecast. Elgers and Lo (1994) and Mozes (2003) provide evidence that historical earnings can be used to adjust analysts' forecasts in such a way that it improves the accuracy of earnings forecasts.…”

Section: Literature Reviewmentioning

confidence: 99%

The use of price-to-earnings-to-growth (PEG) ratios to predict share performance on the JSE

I'Ons

Ward

2012

SAJBM

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The effectiveness of the Price Earnings Growth ratio as a valuation tool has been a topical debate amongst analysts ever since being popularised by Lynch (1989). This study examines the appropriateness of the fair value criteria of a PEG of 1,0, as proposed by Lynch (PEG L ), and compares this with the time-series based, share specific model, proposed by Trombley (2008) (PEG T ). In addition, the study analyses several factors which influence the accuracy of analyst's forecasts (viz. the number of analysts' contributions, the dispersion of forecasts and the forecast horizon), with the objective of identifying an optimal trading rule based on the PEG ratio.We find consistent outperformance of the PEG T model. We also note (unexpectedly) that analyst's forecasting accuracy may have a less significant impact on the usefulness of the PEG ratio than their optimism. Finally, we report an optimised PEG trading rule which delivered annual abnormal returns of 13,7% over the study period. The trading rule appeared to single out small-capitalisation firms, with above market growth prospects, which performed well in a buoyant market.

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“…Analysts are concerned with the timeliness of their forecasts and recommendations (Cooper et al, 2001;Clement and Tse, 2003;Mozes, 2003); therefore, analysts might quickly revise their recommendations on the weekend in reaction to firm events or news that occur on Friday or on the weekend. To capture this effect, we control for firm-specific events or news released on the Friday of or the Friday prior to the recommendation revision with the variable ABRET_FRI.…”

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confidence: 99%

Working on the Weekend: Do Analysts Strategically Time the Release of Their Recommendation Revisions?

2013

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We examine whether financial analysts strategically time the announcement of their recommendation revisions consistent with their incentives to maintain relations with management. We provide evidence that investor and media attention to recommendation revisions is reduced on weekends, which analysts can exploit to strategically time the release of their revisions. We find that downgrades are a higher proportion of weekend revisions than weekday revisions and that analysts with characteristics that suggest they possess the strongest incentives to maintain favor with management are more likely to downgrade on the weekend. In contrast, analysts absent these characteristics are more likely to release downgrades during the week, consistent with these analysts being driven primarily by other incentives, such as the timely release of their recommendation and garnering media attention. We also present evidence suggesting that strategic disclosure of recommendation downgrades is associated with greater access to management on public earnings conference calls.

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Accuracy, usefulness and the evaluation of analysts’ forecasts

Cited by 41 publications

References 26 publications

Team earnings forecasting

Team earnings forecasting

The use of price-to-earnings-to-growth (PEG) ratios to predict share performance on the JSE

Working on the Weekend: Do Analysts Strategically Time the Release of Their Recommendation Revisions?

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