Download Determinants of Earnings Forecast Error, Earnings Forecast by Sebastian Gell PDF

By Sebastian Gell

​Earnings forecasts are ubiquitous in today’s monetary markets. they're crucial signs of destiny enterprise functionality and a kick off point for enterprise valuation. super erroneous and overoptimistic forecasts throughout the most modern monetary difficulty have raised severe doubts concerning the reliability of such forecasts. This thesis accordingly investigates new determinants of forecast mistakes and accuracy. moreover, new determinants of forecast revisions are tested. extra in particular, the thesis solutions the next questions: 1) How do analyst incentives bring about forecast error? 2) How do alterations in analyst incentives result in forecast revisions?, and three) What components force transformations in forecast accuracy?

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Additional resources for Determinants of Earnings Forecast Error, Earnings Forecast Revision and Earnings Forecast Accuracy

Sample text

The analysis sbould be of interest to both researchers and practitioners. For researchers, my model sbeds ligbt on the different drivers of forecast revisions that have to be controlled for in each aoalysis of forecast revisions. " For practitioners, my model migbt be useful in guiding investment decisions: Analyst incentives to bias forecasts apparently change over the fiscal year, which may cause a revision even in the absence of significant news. My aoalysis allows an identification of these changes in aoalyst incentives and thus leads to a more accurate assessment of analysts' motivation to revise their estimates.

This reform aims at making analysts less dependent on the access to management information. In addition, the NASD Rule 2711 specifies extensive restrictions on the relationship between a brokerage house's research department with other departments (especially the investment banking department), the communications with the subject fum and personal trading by analysts. " Finally, analysts themselves may pursue aims different than the ones by investors, forecasted firms, employers or regulators impacting the qnality of the underlying earnings estimate.

INDROE" a proxy for future prospects, is the industry-adjusted return on equity of fiscal year t, measured as ROE (income before extraordinary items, divided by the average of common equity for fiscal year t) minus the median ROE of all fmns in the same year and the same two-digit SIC industry. RET, is the cumulated buy-and-hold abuormal stock return from the first day after Period I until one day before the earnings announcement of fiscal year t. D, is a dummy variable, taking the value one if RET, is negative and 0 otherwise.

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