Forecast Error, Earnings Variability and Systematic Risk: Additional Evidence

Comiskey, Eugene E.; Mulford, Charles W.; Porter, Thomas L.

doi:10.1111/j.1468-5957.1986.tb00095.x

Cited by 4 publications

(3 citation statements)

References 8 publications

(1 reference statement)

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“…6 We perform a cross-sectional analysis on the basis of individual securities rather than at a portfolio level. We acknowledge that, if the analysis was conducted at a portfolio level, the possible downward bias in the estimated coefficients that arises from measurement errors at individual level might be mitigated if individual shares were not perfectly correlated (e.g., Comiskey, Mulford, & Porter, 1986). However, this would come at the expense of a loss of information and a reduction in degrees of freedom, thereby hampering our ability to identify and analyze crosssectional differences in our (short) time-series data set (Chung & Charoenwong, 1991).…”

Section: Resultsmentioning

confidence: 99%

Corporate ownership, equity risk and returns in the People's Republic of China

2008

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A large body of literature has examined how managerial ownership affects corporate strategy and risk-taking. The present study extends this literature by investigating the effect of other forms of corporate ownership on a firm’s equity risk (measured as the volatility of a company’s stock returns) and stock returns in the People’s Republic of China (PRC) – an important emerging economy that is rich in various forms of corporate ownership. We find that the various types of corporate ownership appear to have important but different impacts on equity risk and returns. In particular, companies with more state ownership tend to have higher stock volatility and lower stock returns; in contrast, companies with more legal-person ownership tend to have lower stock volatility and higher stock returns. Foreign and managerial ownership are found to have little effect on firms’ equity risk and returns. These findings support the predictions of agency theory – for example, that state ownership increases agency conflicts in companies because bureaucrats and state agencies do not have the same economic incentives to maximize the value of firms. We believe that our study contributes to the international business literature on investment strategy and risk assessment in developing markets such as China, and as a result our findings could have important implications for international investors. Journal of International Business Studies (2008) 39, 1149–1168. doi:10.1057/palgrave.jibs.8400394

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Section: Resultsmentioning

confidence: 99%

Corporate ownership, equity risk and returns in the People's Republic of China

2008

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“…Both of these variables relate to ex ante uncertainty that has been positively associated with absolute forecast enors. (Kross, Ro, and Schroeder 1990;Brown, Richardson, and Schwager 1987;Comiskey, Mulford, and Porter 1986;Albrecht, Johnson, Lookabill, and Watson 1977). Prior research suggests that the more erratic the time sedes of eamings (SDE), the more difficult the sedes is to forecast.…”

Section: (7)mentioning

confidence: 99%

Evidence from Archival Data on the Relation Between Security Analysts' Forecast Errors and Prior Forecast Revisions*

Elliot

Philbrick

Wiedman

1995

Contemporary Accting Res

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Abstract. This paper examines the association between analysts' forecast errors at the earnings announcement date and the revisions to those forecasts during the preceding year. The study is an initial effort to use archival data from expert decision makers to test behavioral theories that have support in laboratory environments. Consistent with findings of conservatism in laboratory experiments, we find that analysts systematically underweight new information. This finding is most pronounced when the analysts are consistently revising their estimates downward throughout the year. Résumé. Les auteurs examinent le lien entre les erreurs prévisionnelles des analystes à la date de déclaration des bénéfices et les révisions dont ces prévisions ont fait l'objet au cours de l'exercice précédent. Il s'agit là d'une première tentative d'utilisation des données d'archives des experts en matière décisionnelle dans le but de tester les théories comportementales qui ont été démontrées en laboratoire. Conformément aux observations faites en laboratoire en ce qui a trait à la prudence, les auteurs constatent que les analystes accordent systématiquement trop peu de poids à l'information nouvelle/Cette constatation est très marquée lorsque les analystes révisent continuellement leurs estimations à la baisse au cours de l'année.

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“…They demonstrated that the higher the firm's payout ratio, the lower will be the systematic risk of its common stock. O n the other hand, Comiskey et al (1986) argued that an important determinant of risk is the inability to forecast earnings rather than earnings variability. They presented strong empirical evidence supporting their hypothesis.…”

Section: Examination Of the Joint Efft Of The Dol And The Demand Betamentioning

confidence: 99%

The Impact of the Demand Volatility and Leverages On the Systematic Risk of Common Stocks

Chung

1989

Business Fin & Account

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Forecast Error, Earnings Variability and Systematic Risk: Additional Evidence

Cited by 4 publications

References 8 publications

Corporate ownership, equity risk and returns in the People's Republic of China

Corporate ownership, equity risk and returns in the People's Republic of China

Evidence from Archival Data on the Relation Between Security Analysts' Forecast Errors and Prior Forecast Revisions*

The Impact of the Demand Volatility and Leverages On the Systematic Risk of Common Stocks

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