The forecast dispersion anomaly revisited: Time-series forecast dispersion and the cross-section of stock returns

Kim, Dongcheol; Na, Haejung

doi:10.1016/j.jempfin.2016.09.003

Cited by 2 publications

(2 citation statements)

References 29 publications

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“…Stock sales during the GFC was concentrated in hedge funds (Ben-David et al 2012) and institutional investors, especially those with short trading horizons (Cella et al 2013). 4 Consistent with the high level of macro-uncertainty, exit of more sophisticated investors, and impaired investor ability to acquire information during the GFC, Kim and Na (2016) found that earnings forecast dispersion peaked in 2008-2009.…”

Section: The Financial Crisis and Information Uncertaintymentioning

confidence: 94%

The Impact of Information Uncertainty on Stock Performance During the 2008-2009 Financial Crisis

Allen,

Zhang

2023

JAF

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We investigate the impact of information uncertainty on stock performance during the 2008-2009 financial crisis. We document that firms with more information uncertainty suffered a greater stock price drop during the period of market-wide price declines. In contrast, the negative effect of information uncertainty on stock returns was absent during the market-reversal or pseudo-drop period. In addition, during the reversal period, firms with forecast dispersion in the top tercile (or quartile) had more positive returns than those with lower forecast dispersion. We contribute to the literature by testing the relationship between information uncertainty and firm returns in the special setting of the most recent financial crisis and providing initial evidence that firm-specific information uncertainty amplified stock price fluctuations during the financial crisis.

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Section: The Financial Crisis and Information Uncertaintymentioning

confidence: 94%

The Impact of Information Uncertainty on Stock Performance During the 2008-2009 Financial Crisis

Allen,

Zhang

2023

JAF

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“…greater forecast dispersion. Kim and Na (2016) use the time series of forecast dispersion, instead of the cross-section, and find that it contains systematic risk components that are priced in stock returns.…”

Section: Related Literaturementioning

confidence: 99%

Confucius confusion: analyst forecast dispersion and business cycles

Cox

Dayanandan

Donker

et al. 2018

RBF

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Purpose Financial analysts have been found to be overconfident. The purpose of this paper is to study the ramifications of that overconfidence on the dispersion of earnings estimates as a predictor of the US business cycle. Design/methodology/approach Whether aggregate analyst forecast dispersion contains information about turning points in business cycles, especially downturns, is examined by utilizing the analyst earnings forecast dispersion metric. The primary analysis derives from logit regression and Markov switching models. The analysis controls for sentiment (consumer confidence), output (industrial production), and financial indicators (stock returns and turnover). Analyst data come from Institutional Brokers Estimate System, while the economic data are available at the Federal Reserve Bank of St Louis Economic Data site. Findings A rise in the dispersion of analyst forecasts is a significant predictor of turning points in the US business cycle. Financial analyst uncertainty of earnings estimate contains crucial information about the risks of US business cycle turning points. The results are consistent with some analysts becoming overconfident during the expansion period and misjudging the precision of their information, thus over or under weighting various sources of information. This causes the disagreement among analysts measured as dispersion. Originality/value This is the first study to show that analyst forecast dispersion contributions valuable information to predictions of economic downturns. In addition, that dispersion can be attributed to analyst overconfidence.

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The forecast dispersion anomaly revisited: Time-series forecast dispersion and the cross-section of stock returns

Cited by 2 publications

References 29 publications

The Impact of Information Uncertainty on Stock Performance During the 2008-2009 Financial Crisis

The Impact of Information Uncertainty on Stock Performance During the 2008-2009 Financial Crisis

Confucius confusion: analyst forecast dispersion and business cycles

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