Inefficiency in Analysts' Earnings Forecasts: Systematic Misreaction or Systematic Optimism?

Easterwood, John C.; Nutt, Stacey R.

doi:10.1111/0022-1082.00166

Cited by 651 publications

(389 citation statements)

References 26 publications

Supporting

Mentioning

329

Contrasting

Unclassified

Order By: Relevance

“…They demonstrate that when people like certain thing they evaluate it as less risky and if they do not like something then they evaluate it as more risky. There is evidence, that investors do not consider too much information which is undesirable for them at some moment, but on the other hand put too much importance on desirable information (Daniel et al, 2002;Easterwood & Nutt, 1999). Ariely (2008) suggests that emotions drive people behavior.…”

Section: 31enviroment Of Decision Making On Foreign Direct Investmentmentioning

confidence: 99%

Behavioral economics perspective on foreign direct investment in emerging markets: The case on Bosnia and Herzegovina

Halaba¹,

Ilguen²,

Halilbegovic³

2017

10.5267/j.ac

View full text Add to dashboard Cite

The growing field of behavioral economics (BE) has revolutionized the way we look at economic behavior at micro and macro levels. Importance of foreign direct investment (FDI) appeals for analysis of decisions made regarding it to be assessed from expanding view of BE. This research provides overview of previous studies and focuses on the case of Bosnia and Herzegovina (B&H) as representative of emerging markets to investigate motivations for investing into this country by temporarily present foreign companies. Empirical analysis was based on the questionnaire that was disseminated among foreign investors to B&H. Questionnaire contained motivations for investing in B&H, where examined motivation factors were divided in two groups; namely irrational and rational ones. Choice of methodology was narrowed due to moderate sample size, but consisting of quality the sample members. In order to analyze data, descriptive statistics, correlation analysis and regression analysis were used. By regressing two groups of predictors on annual amount of foreign investments to B&H, it was shown that the highest motivation for investing was business instinct.Growing Science Ltd. All rights reserved. 7

show abstract

Section: 31enviroment Of Decision Making On Foreign Direct Investmentmentioning

confidence: 99%

Behavioral economics perspective on foreign direct investment in emerging markets: The case on Bosnia and Herzegovina

Halaba¹,

Ilguen²,

Halilbegovic³

2017

10.5267/j.ac

View full text Add to dashboard Cite

show abstract

“…Studies report that analysts fail to incorporate all publicly available information in their forecasts (Abarbanell and Bernard, 1992;Lys and Sohn, 1990) and are prone to over-and under-reaction (DeBondt and Thaler, 1990;Easterwood and Nutt, 1999). European evidence is generally consistent with US findings (Capstaff, Paudyal and Rees, 1995;Hodgkinson, 2001;Wallmeier, 2005) but there is unsystematic variation between European countries (Capstaff et al, 2001).…”

Section: Information Sources Used By Professional Equity Investorsmentioning

confidence: 99%

Who Uses Financial Reports and for What Purpose? Evidence from Capital Providers

Cascino

Clatworthy

Osma

et al. 2014

Accounting in Europe

View full text Add to dashboard Cite

We review the academic literature on the use of financial reporting information by capital providers. We classify our findings by investor type and by information objective. While most capital providers use accounting information, our survey indicates that they do so in a variety of ways with financial reporting information competing with other sources of information. We also find that information intermediaries are influential in both credit and equity markets, making the identification of a typical target 'user' inherently difficult. Our main findings question the underlying objective of the Conceptual Framework to guide the development of standards for general-purpose financial statements to provide a typical knowledgeable investor with a true and fair view about the reporting entity. Finally, we identify gaps in the literature and suggest areas where future research can help inform important academic and policy debates.

show abstract

“…Ali et al, (1992) find a tendency for analysts to provide overoptimistic estimates of annual earnings, and report that forecast errors display significantly positive serial correlation. Easterwood and Nutt (1999) examine the analysts' consensus forecasts of annual earnings, and conclude that analysts underreact to negative information while they tend to overreact to positive information. Ho (1999) and Ho and Tsay (2004) show that the analysts' forecast errors also exhibit significant positive serial correlation for Canadian and Taiwanese firms, respectively.…”

Section: Serial Correlation In Individual Analysts' Forecast Errors Amentioning

confidence: 99%

Properties of Individual Analysts’ Earnings Forecasts for the Turkish Stock Market

Aydo¹,

Sarao²

2005

boun

View full text Add to dashboard Cite

We examine the properties of individual analysts' forecasts of annual earnings for Turkish companies. Using a sample obtained from the Institutional Brokers Estimate System (I/B/E/S) database of earnings forecasts, we measure individual analysts' forecast errors and relative optimism, and test for serial correlation in these measures. We also compare the forecast accuracy of analysts working for Turkish brokerage firms to the forecast accuracy of those employed by non-Turkish firms. An important contribution of this paper is that it is the first study to focus on the earnings forecasts of Turkish companies at the individual analyst level.The past decade has seen substantial growth in emerging markets as investors seeking high returns and potential diversification benefits have channeled their funds into assets in these markets. Turkey, which is identified as a big emerging market by the U.S. Department of Treasury (see Business America, 1994), has enjoyed substantial growth in its equity market since the inception of the Istanbul Stock Exchange (ISE) in 1986. Sustained growth in the Turkish equity market and its integration with the world capital markets require the availability of timely and accurate information on company performance. Security analysts' forecasts of company earnings are an integral part of the information set for equity investors. The role of analysts' earnings forecasts as a representative of the market's earnings expectations is well documented in the literature (see Brown, 1978;Fried and Givoly, 1982;Rendleman et al., 1982;and Brown et al., 1987). Also, analyst following is a good indicator of interest in and potential growth of an equity market. Figure 1 shows the number of Turkish companies for which analysts reported earnings forecasts to the Institutional Brokers Estimate System (I/B/E/S) for each year during the 1994-2001 period. As is apparent in Figure 1, there was a significant increase in the number of Turkish companies followed by analysts, which can be interpreted as a sign of increased interest in the Turkish equity market.There is a rich body of research that focuses on the characteristics of individual analysts' earnings forecasts. Tamura (2002) studies the properties of individual analyst forecasts and finds that an analyst's forecast tends to be influenced by her personality. Cooper et al., (2001) rank individual analyst forecasts and conclude that lead analyst forecasts tend to impact the markets more than the follower analyst forecasts do. On the international analyst forecast side, Firth and Gift (1999) compare the precision of consensus analyst forecasts across countries and find that estimates are more precise for eight countries compared to the U.S. consensus estimates. Allen et al., (1997) find differences in forecast errors between Pacific Basin markets and more developed capital markets. Ang and Ma (2001) document that analysts failed to anticipate the Asian financial crisis. De Bondt and Forbes (1999) find evidence for herding behavior among U.K. analysts....

show abstract

Inefficiency in Analysts' Earnings Forecasts: Systematic Misreaction or Systematic Optimism?

Cited by 651 publications

References 26 publications

Behavioral economics perspective on foreign direct investment in emerging markets: The case on Bosnia and Herzegovina

Behavioral economics perspective on foreign direct investment in emerging markets: The case on Bosnia and Herzegovina

Who Uses Financial Reports and for What Purpose? Evidence from Capital Providers

Properties of Individual Analysts’ Earnings Forecasts for the Turkish Stock Market

Contact Info

Product

Resources

About