digital labor market intermediation and job expectations evidence from a field experiment subjective expectations are fundamental for understanding individual behavior yet little is known about how individuals use new information to formulate and update their subjective expectations in this study we exploit data from a multi treatment field experiment to investigate how job market information sent to jobseekers via short text messages sms influence subjective job gain expectations in peru results show that jobseekers who received digital intermediation based on a large information set increased their before after job gain expectations relative to the control group independently of the information channel no significant effects were found when labor market intermediation is based on a restricted short set of information

summary financial statement measures and analysts forecasts of earnings abstract this study distinguishes between the information in the ou and penman 1989a pr measure and that in analysts forecasts of earnings for cases where analysts forecasts are available trading on pr produces abnormal returns only when the predictions of pr and those of analysts forecasts disagree this is consistent with pr capturing some information not impounded in market prices however abnormal returns to this trading strategy continue for up to 72 months after the release of the data necessary to compute pr this is consistent with pr proxying for the effects of omitted risk factors

the effect of experience on security analyst underreaction abstract we examine if analysts more fully incorporate prior earnings and returns information in their current quarter forecasts as their experience following a firm increases we measure analyst firm specific forecasting experience as the number of prior quarters for which the analyst has issued an earnings forecast for the firm we find that analysts underreact to prior earnings information less as their experience increases suggesting one reason why analysts become more accurate with experience

analysts weighting of private and public information using both a linear regression method and a probability based method we find that on average analysts place larger than efficient weights on i e they overweight their private information when they forecast corporate earnings we also find that analysts overweight more when issuing forecasts more favorable than the consensus and overweight less and may even underweight private information when issuing forecasts less favorable than the consensus further the deviation from efficient weighting increases when the benefits from doing so are high or when the costs of doing so are low these results suggest that analysts incentives play a larger role in misweighting than their behavioral biases copyright 2006 oxford university press

supply chain information in analyst reports on publicly traded companies abstract analyst reports are an important source of secondary data on companies for understanding a company s performance in the recent past and for getting guidance on its future performance we therefore analyzed the text of 1028 equity analyst reports of 145 fortune 500 global companies not including services sectors like it or banking published between 2009 and 2011 for supply chain related information we found that nearly three fifths of these reports contained supply chain information pertaining to inbound process or outbound aspects of the supply chain of the company at the report level there are significant industry effects for supply chain related content in analyst reports on the other hand aggregating information at the company level it appears that analysts focus on a particular supply chain aspect for a company as well as its sector furthermore logistic regression analysis suggests a link between the supply chain information provided when this is positive in orientation and the buy sell hold recommendation of the analyst regarding the company s stock

forecast accuracy of individual analysts in nine industries the purpose of this paper is to investigate whether financial analysts with superior earnings forecasting ability can be distinguished on the basis of ex post forecast accuracy i explore the question by estimating and comparing average accuracy across individuals and by considering whether the observed distribution of analyst forecast accuracies differs from the distribution expected if their relative performances each year were purely random overall i do not find systematic differences in forecast accuracy across individuals financial press coverage suggests there are superior financial analysts for example institutional investor s annual all american research team includes analysts rated by money managers as superior on a variety of criteria including earnings forecasting ability to pick stocks and the quality of written reports clearly financial analyst services other than forecast accuracy are valued by their clients i focus on only one activity earnings forecasting for two reasons first forecast data are available quantitative and can be evaluated against observable earnings outcomes services such as insightful well written research reports are harder to evaluate quantitatively second academic use of analyst forecasts as earnings expectations data in capital markets empir

analysts interim earnings forecasts evidence on the forecasting process existing empirical evidence indicates that analyst forecasts of corporate earnings do not meet the strict rationality standards prescribed by econometric tests of the rational expectations hypothesis 1 in this paper we address the question of whether the expectation formation process underlying analyst forecasts is adaptive or whether these forecasts are influenced by noninformational factors such as incentives arising from the market for their forecasts o brien 1988 lin and mcnichols 1993 francis and philbrick 1993 and dugar and nathan 1992 and interaction between judgmental and or statistical forecasting methods bunn and wright 1991 fan 1990 and hoerl and kennard 1970 the rejection of rational expectations gives rise to two views of the forecasting process of analysts the first based on an informational argument is that the forecasting process is adaptive marcet and sargent

stock market downswing and the stability of european monetary union money demand this article analyzes the question whether money demand in the euro area underwent a structural change in the end of 2001 when m3 money growth started to considerably overshoot the reference value set by the european central bank it is found that conventional specifications of money demand have in fact become unstable whereas specifications that are augmented with equity returns and volatility remain stable using such an augmented specification it turns out that the high m3 growth rates have not led to excess liquidity and thus do not pose a measurable threat to price stability

directional preferences information processing and investors forecasts of earnings this paper investigates the effects of preferences on judgments in an investing context where investors should be motivated to interpret information objectively yet have clear preferences with respect to what the information they are evaluating conveys i e a gain or a loss on their investment the results of the experiment are consistent with theories of motivated reasoning that predict when and in what manner directional preferences affect how information is processed specifically investors are motivated to agree unthinkingly with information that suggests they might make money on their investment but disagree with information that suggests they might lose money in disagreeing long investors expect earnings to be relatively high and short investors expect earnings to be relatively low these results have implications not only for understanding investor behavior but also for understanding the biased behavior of market participants who face conflicts of interest such as analysts managers and auditors by providing direct evidence that such behavior can arise for purely psychological reasons

value line rank and firm size this paper studies the relation between value line s successful record in predicting relative stock price movements and the firm size effect the data suggest little direct relation between the two phen omena value line tends not to rank small firm stocks and small firm stocks that are ranked are more likely to receive a low rank than la rge firm stocks within each size sorted quintile of the market the mean payoffs on costless positions constructed according to value lin e s recommendations are positive copyright 1987 by the university of chicago

capital flows and gdp in emerging economies and the role of global spillovers abstract this paper provides a global analysis of capital flow impacts on gdp for selected emerging economies as additional control variables we also include currency reserves and effective exchange rates in our analysis we distinguish between gross and net capital flows and also assess the impact of both fdi and portfolio flows accounting for the fact that common factors have been the main drivers of capital flows while country specific determinants pull factors drive the response to such shocks we analyze shocks to country groups but consider country specific responses based on a bayesian time varying panel var framework in the spirit of canova and ciccarelli 2009 based on a sample of 24 economies our results show a robust positive effect of capital flows on gdp except for korea both gross and net capital flows display a positive impact for around two quarters the impact of effective exchange rates on gdp hardly offers an explanation for a possible transmission of capital flow effects with effective depreciations both positively and negatively linked to gdp we also find that the effect of net portfolio flows is even more positive compared to net fdi flows for emerging economies finally we provide evidence that the importance of global factors increases in times of crises

analyst responsiveness and the post earnings announcement drift abstract this study examines the responsiveness of analyst forecasts to current earnings announcements the results show considerable cross sectional variation in analyst responsiveness and suggest that this variation is related to the costs and benefits associated with prompt forecast revisions more importantly this study finds that with responsive forecast revisions more of the market reaction takes place in the event window and less in the drift window suggesting that analyst responsiveness mitigates the post earnings announcement drift and facilitates market efficiency

the effects of inflation news on high frequency stock returns previous research using daily returns finds conflicting evidence about the relationship between unanticipated inflation news and stock returns we explore the relationship by looking at the response in minutes and trades of size based stock portfolios to unexpected changes in the regularly scheduled producer price index and consumer price index announcements in particular we answer the following three questions 1 do stocks respond to inflation news 2 what is the speed and path of that response 3 is the response stable or does it vary with the economy the direction of the news or time

necessity as the mother of invention monetary policy after the crisis we examine recent changes in monetary policy due to the financial crisis and ask whether they are likely to be temporary or permanent we present evidence from two original surveys one of central bank governors the other of academic specialists we find that central banks in crisis countries are more likely to have resorted to new policies to have had discussions about changing mandates and to have communicated more extensively but thinking has changed more broadly for instance many central banks in non crisis countries also report implementing macro prudential measures looking forward we expect central banks to have broader mandates use macro prudential tools more widely and communicate more actively than before the crisis while there is no consensus yet about the usefulness of unconventional monetary policies we expect most of them will remain in central banks toolkits as governors who gain experience with a particular tool are more likely to assess that tool positively finally the relationship between central banks and their governments might well have changed with central banks crossing the line into the political realm more often than in the past

a positive model of earnings forecasts top down versus bottom up this article analyzes the behavior of two groups of corporate earnings forecasters analysts who follow individual company fortunes and market strategists who predict earnings for various company aggregates using data for two market indices the s p 500 and the dow jones industrial average we document that bottom up forecasts are systematically more optimistic than top down forecasts made by strategists this difference is not driven by the difference in the forecast target this finding may be explained by the incentives that analysts face and or by cognitive bias

security analyst superiority relative to univariate time series models in forecasting quarterly earnings abstract this paper provides evidence of security analyst sa superiority relative to univariate time series ts models in predicting firms quarterly earnings numbers and shows that sa forecast superiority in our sample is attributable to 1 better utilization of information existing on the date that ts model forecasts can be initiated a contemporaneous advantage and 2 use of information acquired between the date of initiation of ts model forecasts and the date when sa forecasts are published a timing advantage

earnings skewness and analyst forecast bias abstract we argue that if analysts objective is to provide the most accurate forecast by minimizing the mean absolute forecast error then the optimal forecast is the median instead of the mean earnings forecast bias is observed when the median is different from the mean in a skewed earnings distribution thus part of the observed analyst forecast bias could be a result of analysts efforts to improve forecast accuracy when the earnings distribution is skewed we find that earnings skewness is significantly related to analyst forecast bias we also provide evidence that the market adjusts for part of the skewness induced bias

does past success lead analysts to become overconfident this paper provides evidence that analysts who have predicted earnings more accurately than the median analyst in the previous four quarters tend to be simultaneously less accurate and further from the consensus forecast in their subsequent earnings prediction this phenomenon is economically and statistically meaningful the results are robust to different estimation techniques and different control variables our findings are consistent with an attribution bias that leads analysts who have experienced a short lived success to become overconfident in their ability to forecast future earnings

discrete expectational data and portfolio performance in this article we examine the information content in analysts recommendations which are made on a five point buy hold or sell scale our data set includes data on 10 000 forecasts per month unlike most prior studies our data set does not suffer from selection or survivorship bias we find information in analysts changes in recommendations approximately 4 5 extra return can be earned by purchasing new buys rather than new sells

the effect of value line investment survey rank changes on common stock prices abstract the information content of value line investment survey rank changes is investigated the results suggest rank changes affect common stock prices but the effect varies by the type of rank change changes from rank 2 to rank 1 have the most dramatic impact on prices a cross sectional analysis finds small firms have a greater reaction to a rank change than larger firms which supports theories on the frequency of report arrival and precision of information a speed of adjustment test concludes the prices of individual securities adjust to the information in a rank change over a multiple day period

analyst forecasting errors and their implications for security analysis a comparison of 66 100 consensus estimates of wall street analysts with reported earnings for a large sample of nyse amex and otc companies demonstrates that their forecasts differ significantly from actual reported earnings a minority of estimates fall within a range around reported earnings considered acceptable to many professional investors the error rates are not meaningfully affected by the business cycle or industry groupings the average error also appears to be increasing over time these findings question the use of finely calibrated earnings forecasts that are integral to the most common valuation models and indirectly question the valuation methods themselves

accounting measurement price earnings ratio and the information content of security prices a number of papers for example beaver lambert and morse 1980 beaver lambert and ryan 1987 collins kothari and rayburn 1987 and freeman 1987 have documented that stock prices lead accounting earnings these investigations have led to the conclusions that prices provide information about earnings ahead of time and that earnings capture events that affect security prices with a lag the study of p e ratios has supported those conclusions and also produced additional insights beaver and morse 1978 have shown that pie ratios not only predict future earnings changes but they also identify transitory aspects of current earnings investors utilize other information in setting prices which provides both a prediction of future earnings and an indication of whether current earnings are representative of future earnings thus a comparison of price to earnings in a p e calculation can indicate the extent to which current earnings are transitory 1 in this paper we show that information in prices that leads future earnings is contained in financial statements while accrual accounting

portfolio behaviour in a flow of funds model for the household sector in india we estimate a flow of funds model for the household sector in india within the almost ideal demand system aids framework and examine the demand for money and the substitution effects between money and other financial assets the restricted long run model obtained using cointegration techniques provides stable equilibrium relationship between i 1 variables and broadly satisfies the axioms of rational choice in consumer demand theory we find that financial sector reform exerts a significant impact on the interest rate structure and household portfolio preferences specifically there is strong substitutability among risk free assets and a possible speculative effect in the stock market while the exchange rate strongly influences the demand for money these findings all have important policy implications

terrorist attacks analyst sentiment and earnings forecasts we examine whether exogenous and extremely negative events such as terrorist attacks and mass shootings influence the sentiment and forecasts of sell side equity analysts we find that analysts w

optimism bias portfolio delegation and economic welfare this study explores the effects of investor optimism bias in a portfolio delegation framework we show that the optimistic investor increases his portfolio delegation while the risk averse manager reduces investment in the risky asset the investor suffers welfare loss due to lower expected return but the manager enjoys increased compensation the investor s optimism bias aggravates the moral hazard problem

the forecast accuracy of individual analysts evidence of systematic optimism and pessimism o brien 1990 examines the annual earnings forecast accuracy of individual analysts reporting to the institutional brokers estimate system ibes of lynch jones and ryan during july 1975 september 1982 using a regression model which adjusts for average firm and year effects o brien finds no evidence of differential forecast accuracy comparing individual analysts earnings forecasts to median consensus forecasts during 1983 86 we also find no statistically significant evidence of differential analyst forecast accuracy our result however does not mean that one analyst s forecasts are much like another s we find that analysts are persistently optimistic or pessimistic relative to consensus forecasts we examine this persistent behavior and its effect on measures of forecast accuracy over a sample

analysts herding when does sentiment matter abstractherding among analysts emerges when analysts give priority to their peers opinions instead of their own beliefs or information some circumstances may enhance or restrain this type of behaviour we postulate that market sentiment is one of them this article analyses the effect that investor sentiment may have on analysts herding behaviour in the u k our results suggest that easy situations such as analysing easy to value securities and releasing optimistic information at times of high market sentiment clearly reduce herding practices whereas herding clearly increases in difficult situations when analysts have to release negative information at moments of high investor sentiment

for a few dollars more reserves and growth in times of crises abstract based on a dataset of 112 emerging economies and developing countries this paper addresses the question whether the accumulation of international reserves has effectively protected countries during the 2008 09 financial crisis more specifically the paper investigates the relation between international reserves and the existence of capital controls we find that the level of reserves matters countries with high reserves relative to short term debt suffered less from the crisis particularly when associated with a less open capital account this suggests some degree of complementarity between reserve accumulation and capital controls

loss function assumptions in rational expectations tests on financial analysts earnings forecasts abstract prior research concludes that financial analysts do not process public information efficiently in generating their earnings forecasts the ordinary least squares ols regression based tests used in prior studies assume implicitly that analysts face a quadratic loss function in contrast we argue that analysts likely face a linear loss function and hence try to minimize their absolute forecast errors we conduct and compare rational expectations tests using these two alternative loss functions we reproduce most prior findings of forecast inefficiency with ols regressions but find virtually no evidence of forecast inefficiency with least absolute deviation regressions where we explicitly assume a linear loss function

optimistic behavior when a decision bias is costly an experimental test the existence of optimism when biased decisions are costly is investigated experimentally subjects make an informed guess about an exogenously determined event the outside temperature a couple of days later payments in the control group depend only on how close the guess was to the realized temperature while payments in the treatment group also depend positively on realized temperature the data show the treatment group subjects to guess higher temperatures that is higher payments compared with the control group results thus indicate that there is optimism also when a decision bias is costly jel c91 d81 d84

the information content of losses abstract this study hypothesizes that because shareholders have a liquidation option losses are not expected to perpetuate they are thus less informative than profits about the firm s future prospects the results are consistent with the hypothesis they also show that the documented increase in the earnings response coefficent as the cumulation period increases appears to be due exclusively to the effect of losses the liquidation option effect extends to profitable cases where earnings are low enough to make the option attractive alternating explanations for the low informativeness of losses such as mean reversal of earnings are not supported by the tests

overview of the special issue on policy implications of and lessons from the global financial crisis this paper reviews the special issue policy implications of and lessons from the global financial crisis and its themes global liquidity and the use of international reserves real and financial economic patterns before and during the global financial crisis

earnings surprise research synthesis and perspectives an investigation of the relation between earnings surprise and three empirical anomalies the p e effect the size effect and the value line enigma indicates that the standardized unexpected earnings sue effect appears to be separate and distinct from each of the three the relations between the sue phenomenon and firm risk the appropriateness of the earnings expectations model and the role of transaction costs are also investigated the sue phenomenon is not attributable to inappropriate risk adjustment use of the wrong earnings expectations model or ignoring transaction costs the sue effect may be partly explained by analysts behavior and is both predictable and profitable the sue effect has also been observed in japan

market demand for conservative analysts abstract sell side analysts on balance have incentives to emphasize good company news and downplay the bad resulting in inefficient forecasts we conjecture that this behavior generates a demand for forecasts from conservative analysts who unwind this pattern at least in part resulting in more efficient forecasts to investigate we introduce a measure of analyst conservatism and assess the market reaction to analysts forecast revisions conditioned on their past levels of conservatism we find a stronger market reaction to forecast revisions by more conservative analysts and that this result is heightened for companies with greater institutional investor following

debt covenant violation and manipulation of accruals abstract this paper examines the abnormal accruals of a sample of 94 firms that reported debt covenant violations in annual reports we expect debt covenant restrictions to influence accounting choices in the year preceding and the year of violation time series and cross sectional models are used to estimate normal accruals in the year prior to violation both models indicate that abnormal total and working capital accruals are significantly positive in the year of violation there is evidence of positive abnormal working capital accruals after controlling for management changes and auditor going concern qualifications

misspecification of capital asset pricing this study documents empirical anomalies which suggest that either the simple one period capital asset pricing model capm is misspecified or that capital markets are inefficient in particular portfolios based on firm size or earnings price e p ratios experience average returns systematically different from those predicted by the capm furthermore the abnormal returns persist for at least two years this persistence reduces the likelihood that these results are being generated by a market inefficiency rather the evidence seems to indicate that the equilibrium pricing model is misspecified however the data also reveals that an e p effect does not emerge after returns are controlled for the firm size effect the firm size effect largely subsumes the e p effect thus while the e p anomaly and value anomaly exist when each variable is considered separately the two anomalies seem to be related to the same set of missing factors and these factors appear to be more closely associated with firm size than e p ratios

in denial stock market underreaction to going concern audit report disclosures abstract we investigate the stock price reaction to uk going concern audit report disclosures in the calendar year subsequent to publication over this period our firm population underperforms by between 24 and 31 depending on the benchmark adopted this market underreaction to such an unambiguous bad news release is not a post earnings announcement drift phenomenon it is also robust to other potentially confounding explanations however whatever the reasons for such stock mispricing we find costly arbitrage prevents rational investors forcing prices back into line with fundamental value our results have implications for the market s ability to impound bad news appropriately and the incompleteness of arbitrage in such small loser firm situations

unifying underreaction anomalies this paper asks whether momentum and postevent drift are manifestations of the same underlying mechanism or are separate phenomena we find that both effects can be attributed to persistence in returns following news that affects expected earnings or earnings growth holding these quantities fixed there is no momentum effect nor is there postevent drift for our sample of events which includes seasoned equity offerings repurchases equity financed mergers and dividend initiations and omissions the implication is that return continuation follows fundamental news in general and in aggregate this explains momentum

reading the tea leaves model uncertainty robust forecasts and the autocorrelation of analysts forecast errors abstract we put forward a model in which analysts are uncertain about a firm s earnings process faced with the possibility of using a misspecified model analysts issue forecasts that are robust to model misspecification we estimate that this mechanism explains approximately 60 of the autocorrelation in analysts forecast errors the remainder stems from the cross sectional variation in mean forecast errors and in analysts estimation errors of the persistence of earnings growth shocks consistent with our model we find that analysts learn about some features of the earnings process but not others and this learning reduces but does not eliminate the autocorrelation of forecast errors as firms age other potential explanations for the autocorrelation of analyst forecast errors are rejected our model of robust forecasting applies not only to analysts forecasts but also to all model based forecasts

intertemporal optimizing models of trade and current account balance a survey abstract this study surveys the intertemporal optimizing models of trade and current account balance that were developed calibrated and empirically tested since they came into vogue in the 1980s the implications of these models often differ from those of static and dynamic conventional non optimizing models the literature on optimizing models has not only grown reasonably fast but has also witnessed significant advances in methodology and these models have culminated into a distinct strand of new open economy macroeconomics the studies conducted until the late 1980s have used deterministic perfect foresight models while several studies conducted since the 1990s relax the perfect foresight and certainty equivalence assumptions and develop stochastic dynamic general equilibrium models to account for uncertainty confronting the optimizing agents the future research needs to explore the possibility of tracing any preferred specification of household preferences model the effect of time varying discount factor on household utility function and intertemporal budget constraint examine the role of costs in international trade place a parallel emphasis on the empirical verifications of theoretical propositions examine the relative performance of optimizing vis a vis non optimizing models and rationalize the extreme propositions of perfect and imperfect capital mobility in the wake of moderately open capital accounts

what good does doing good do the effect of bond rating analysts corporate bias on investor reactions to changes in social responsibility in this study we explore how investors reconcile information on firms social responsibility with analysts assessments of future firm risk in the pricing of long term bonds we ask whether investors pay attention to small strides toward and or small slips away from socially responsible behavior arguing that analysts corporate bias toward gains and against losses influences investor reactions to corporate social responsibility we hypothesize that analysts notice and reward improvements in social responsibility yet excuse lapses we find support for this hypothesis using a unique dataset of long term bonds that combines lagged measures of firm level financial and social performance with bond specific data pertaining to risk of default and pricing the empirically robust asymmetry in investor responses to small but often cumulative increases versus decreases in corporate social responsibility reveals an under examined root cause of longer term larger scale distortions in financial market returns regarding corporate social performance our findings elaborate earlier behavioral research on how corporate bias influences analysts short term assessments of economic risk by theorizing why this corporate bias may influence long term assessments of social risk our work also motivates more critical scrutiny of the role analysts play in revising the future risk of today s social action versus inaction

bayesian herders updating of rainfall beliefs in response to external forecasts summary temporal climate risk weighs heavily on many of the world s poor model based climate forecasts could benefit such populations provided recipients use forecast information to update climate expectations we test whether pastoralists in southern ethiopia and northern kenya update their expectations in response to forecast information the minority of herders who received these climate forecasts updated their expectations for below normal rainfall but not for above normal rainfall this revealed preoccupation with downside risk highlights the potential value of better climate forecasts in averting drought related losses but realizing any welfare gains requires that recipients strategically react to these updated expectations

predictability in financial analyst forecast errors learning or irrationality in this paper we propose a rational learning based explanation for the predictability in financial analysts earnings forecast errors documented in prior literature in particular we argue that the serial correlation pattern in analysts quarterly earnings forecast errors is consistent with an environment in which analysts face parameter uncertainty and learn rationally about the parameters over time using simulations and real data we show that the predictability evidence is more consistent with rational learning than with irrationality fixation on a seasonal random walk model or some other dogmatic belief

within firm pay inequality financial regulators and investors have expressed concerns about high pay inequality within firms using a proprietary data set of public and private firms this paper shows that firms with higher pay inequality relative wage differentials between top and bottom level jobs are larger and have higher valuations and stronger operating performance moreover firms with higher pay inequality exhibit larger equity returns and greater earnings surprises suggesting that pay inequality is not fully priced by the market our results support the notion that differences in pay inequality across firms are a reflection of differences in managerial talent received march 14 2016 editorial decision january 21 2017 by editor itay goldstein

who is afraid of reg fd the behavior and performance of sell side analysts following the sec s fair disclosure rules we examine regulation fd s impact on the accuracy and dispersion of sell side analysts earnings forecasts using a large sample of quarterly forecasts made over a nearly 10 year period surrounding fd s adoption we uncover two main sets of findings first individual and consensus forecasts become less accurate post fd particularly for early forecasts and for smaller companies second forecast dispersion increases post fd this effect is stronger for early forecasts and has increased with the passage of time these results which are quite robust to alternative empirical methodologies suggest that there has been a reduction in both selective guidance and forecast quality post fd

bias in european analysts earnings forecasts forecasting company earnings is a difficult and hazardous task in an efficient market where analysts learn from past mistakes there should be no persistent and systematic biases in consensus earnings accuracy previous research has already established how some single individual company characteristics systematically influence forecast accuracy so far however the effect on consensus earnings biases of a company s sector and country affiliation combined with a range of other fundamental characteristics has remained largely unexplored using data for 1993 2002 this article disentangles and quantifies for a broad universe of european stocks how the number of analysts following a stock the dispersion of their forecasts the volatility of earnings the sector and country classification of the covered company and its market capitalization influence the accuracy of the consensus earnings forecast

international reserves and global interest rates abstract in this paper we study the relationship between foreign currency international reserve holdings and global interest rates to guide empirical work we solve a simple small open economy model with money where the central bank manages international reserves to smooth inflation over time this model shows that changes in interest rates are positively related to the target level of reserves as a consequence interest rate hikes increase reserve transfers defined as the change in international reserves net of the interest earned on reserves using quarterly data for 75 countries between 2000 and 2013 we document a positive relationship between interest rate changes and reserve transfers as a share of gdp that is consistent with the model

intersectoral financial flows in developing countries this paper is about financial flows in developing countries it reviews the evidence on who the borrowers and lenders are apart from collecting and summarizing available data from some seventeen countries the paper presents the results of an econometric analysis of the interactions between the net lending behaviour of the different sectors the paper is organized as follows section 2 clarifies some terms and in particular explains what a complete set of flow of funds accounts looks like section 3 provides an analytical framework for the consideration of flow of funds data section 4 reports the main data on sectoral surpluses and deficits and summarizes the empirical findings on their mutual interaction and on their determinants section 5 describes the typical pattern in developing countries of financial flows by instrument a summary and conclusion is presented in section 6

self selection and analyst coverage this paper examines the relation between analysts information about a stock s future prospects and their decisions to issue investment recommendations and earnings forecasts for that stock and the implications of this relation for the observed distribution of recommendations and earnings forecast errors articles in the financial press have long argued that analysts are reluctant to issue unfavorable investment information perhaps because they fear jeopardizing potential investment banking

the timing and value of forecast and recommendation revisions abstract this paper evaluates the information content of analysts one quarter ahead earnings forecast revisions and recommendation revisions at various points in event time relative to earnings announcement dates across three sets of tests we find that the revisions are least informative in the week after earnings announcements and that the information content of revisions generally increases over event time we find a sharp increase in the information content of upward forecast revisions and recommendation upgrades in the week before earnings announcements but we do not find a similar increase for downward revisions or for recommendation downgrades

accounting earnings and gross domestic product we document that aggregate accounting earnings growth is an incrementally significant leading indicator of growth in nominal gross domestic product gdp professional macro forecasters however do not fully incorporate the predictive content embedded in publicly available accounting earnings data as a result future nominal gdp growth forecast errors are predictable based on accounting earnings data that are available to professional macro forecasters in real time

a reexamination of analysts earnings forecasts for takeover targets abstract we examine analysts earnings forecasts for a sample of takeover targets and document that the announcement month forecasts are systematically revised upward supporting the hypothesis that a takeover announcement conveys favorable information about the target firm in addition we find that abnormal forecast revisions of future stand alone earnings are significantly greater for targets with low tobin s q ratios relative to targets with high q ratios lending further support to the information hypothesis finally we provide evidence that managerial resistance to the takeover does not destroy value our results are in direct contrast to pound 1988

on the flow of funds accounts and inter sectoral mobility of capital in india this study uses the flow of funds accounts framework and undertakes an in depth analysis of the inter sectoral mobility of capital in india unlike previous studies the fh model is estimated at th

biased forecasts or biased earnings the role of reported earnings in explaining apparent bias and over underreaction in analysts earnings forecasts the extensive literature that investigates whether analysts earnings forecasts are biased and or inefficient has produced conflicting evidence and no definitive answers to either question this paper shows how two relatively small but statistically influential asymmetries in the tail and the middle of distributions of analysts forecast errors can exaggerate or obscure evidence consistent with analyst bias and inefficiency leading to inconsistent inferences we identify an empirical link between firms recognition of unexpected accruals and the presence of the two asymmetries in distributions of forecast errors that suggests that firm reporting choices play an important role in determining analysts forecast errors r 2003 elsevier b v all rights reserved

do sell side stock analysts exhibit escalation of commitment this paper presents evidence that when an analyst makes an out of consensus forecast of a company s quarterly earnings that turns out to be incorrect she escalates her commitment to maintaining an out of consensus view on the company relative to an analyst who was close to the consensus the out of consensus analyst adjusts her forecasts for the current fiscal year s earnings less in the direction of the quarterly earnings surprise on average this type of updating behavior reduces forecasting accuracy so it does not seem to reflect superior private information further empirical results suggest that analysts do not have financial incentives to stand by extreme stock calls in the face of contradictory evidence managerial and financial market implications are discussed

financial development and economic growth nexus a time series evidence from india this study examines the relationship between financial development and economic growth in india for the period 1951 52 to 1995 96 the long run equilibrium and short run dynamic models are estimated using financial interrelations ratio and new issue ratio as the measures of financial development a la goldsmith 1969 the johansen 1991 estimator rejects the null of zero cointegrating vector and shows the presence of long run equilibrium relationship between financial development and economic growth the error correction model impulse response and variance decomposition analyses sims 1980 and the toda and yamamoto 1995 estimator show the presence of bidirectional granger causality between financial development and economic growth the presence of bidirectional granger causality suggested by these estimators points towards the possible problem of endogeneity and simultaneity bias in the growth models that examine the contemporaneous effect of financial development on economic growth the economic

earnings management to avoid earnings decreases and losses this paper provides evidence that firms manage reported earnings to avoid earnings decreases and losses specifically in cross sectional distributions of earnings changes and earnings we lind unusually low frequencies of small decreases in earnings and small losscs and unusually high frequencies of small increases in earnings and small positive income we find evidence that two components of earnings cash flow from operations and changes in working capital are used to achieve increases in earnings we present two theories based on stakeholder use of information processing heuristics and prospect theory about the motivation for avoidance of earnings decreases and losses

the multiperiod information content of accounting earnings confirmations and contradictions of previous earnings reports in this study we propose and test the hypothesis that investors reevaluate earnings announcements in the light of postannouncement information 1 our argument for multiperiod price reactions to earnings news is motivated by the literature linking price responses to earnings persistence 2 when earnings are announced we assume that investors are unable to determine with certainty the persistence of an earnings

analyst forecast consistency we show empirically that analysts who display more consistent forecast errors have greater ability to affect prices and that this effect is larger than that of stated accuracy these results lead to three implications first consistent analysts are less likely to be demoted and are more likely to be nominated all star analysts second analysts strategically deliver downward biased forecasts to increase their consistency if at the expense of stated accuracy finally the benefits of consistency and of lowballing accuracy are increasing decreasing in institutional investors presence

percentage and relative error measures in forecast evaluation properties of two large families of scale free forecast accuracy measures that include popular measures such as mean absolute percentage error relative error and squared percentage error are examined in this paper we describe the optimal reports when forecasts are evaluated using these measures we also provide analytic expressions for the optimal bayes act associated with these measures under a general power transformation for several well known probability distributions we then show that using measures from these two families may inadvertently provide incentives for either pessimism or optimism among forecasters i e rewarding underforecasts or overforecasts relative to some reference measure of central tendency as an illustration of these concepts we examine the use of these measures for model selection in a forecast aggregation example using stock price forecasts derived from the thomson reuters institutional brokers estimate system this example illustrates how aggregation methods that alw

rationality and analysts forecast bias this paper proposes and tests a quadratic loos utility function for modeling corporate earnings forecasting where financial analysts trade off bias to improve management access and forecast accuracy optimal forecasts with minimum expected error are optimistically biased and exhibit predictable cross sectional variation related to analyst and company characteristics empirical evidence from individual analyst forecasts is consistent with the model s predictions these results suggest that positive and predictable bias may be a rational property of optimal earnings forecasts prior studies using classical notions of unbiasedness may have prematurely dismissed analysts forecasts as being irrational or inaccurate

individual analyst characteristics and forecast error the purpose of the study reported here was to investigate how characteristics of analysts affect their forecast errors previous research has found positive serial correlation in forecast errors which can be attributed to underreaction to new information especially to bad news the relationship between an analyst s behavior and that analyst s characteristics is not clear however because most previous work was based solely on consensus estimates by using detailed historical data i found a stronger serial correlation among the herd to consensus analysts that is the group with a small average distance between their forecasts and the consensus forecast than among other analysts moreover average distance to consensus itself has a positive serial correlation and it may be attributed to an analyst s personality optimistic or pessimistic i found strong positive serial correlation in the average distance to consensus among the herd to consensus analysts these results show that herd to consensus ana

which drives abnormal returns over or under reaction studies applying longitudinal analysis this article combined both cross sectional and time series longitudinal analysis to identify that factor anomalies are driven by either over reaction or under reaction the basic principle is first use a factor to form 10 portfolios in the t quarter then observe the average prices and returns of the 10 portfolios for the previous four quarters and for the following four quarters as well samples in this study contain all stocks listed in the us from 1990 to 2010 the empirical evidence shows that the reason for the abnormal returns of value book to price ratios earnings to price ratios sales to price ratios scale and liquidity factors is over reaction meanwhile the reason for the abnormal returns of growth factors return on equity return on assets and revenue growth rate is under reaction the results provide significant policy implications the anomaly returns of the value scale and liquidity factors last longer and are more appropriate to be employed for long run investment while the growt

chronic bias in earnings forecasts whatever the source or explanation of bias in forecasts of company earnings if such bias persists it is potentially discoverable and exploitable by investors this research addresses 1 whether characterizing forecasts as if they were a homogeneous group with respect to bias is accurate or useful and 2 whether a long term record of forecast errors contains information useful in predicting subsequent errors we found that earnings forecasts are heterogeneous with respect to direction and degree of bias we also found evidence of extremes in optimism and pessimism and that extreme errors tend to persist in the same direction which suggests certain potentially profitable trading strategies

analyst forecasting errors and their implications for security analysis an alternative perspective dreman and berry in the may june 1995 financial analysts journal offered a perspective on analyst earnings forecast errors and their implications for security analysis among other arguments they contended that the errors are too large to be reliably used by investors the forecasts are less accurate than forecasts by time series models the errors are increasing over time the analysts forecasts are too optimistic and the investment community relies too heavily on analyst forecasts this article provides an alternative perspective on these issues the argument is that analysts forecast errors are within 3 percent of an appropriate benchmark namely stock price that their forecasts generally are significantly more accurate than forecasts by naive or sophisticated time series models that analyst forecast errors have not been increasing over time that analysts have been too pessimistic in recent years and that the investment community by placing too much weight on forecasts made by time series

foreign reserve management during the global financial crisis this paper examines how countries managed their foreign currency reserves during the global financial crisis evidence based on changes in reserve stocks suggests that many governments even those with high levels of pre crisis reserves were reluctant to use them during the crisis as a consequence a number of recent studies of cross country experiences during the crisis find little evidence of a positive role for reserves in macroeconomic crisis management this paper examines whether this assessment of the non role of reserves during the crisis is justified while the reserve stock data indicates stable reserve levels for many countries during the crisis distinguishing between reserve changes that occurred due to interest income and valuation changes on existing assets and asset purchases and sales indicates that many emerging economies actively depleted reserves further the data indicate that countries whose pre crisis reserve levels were in excess of what can be explained by standard models of reserve accumulation were the most likely to sell reserve assets during the crisis

firm geographic dispersion and financial analysts forecasts using a text based measure of geographic dispersion that captures the economic ties between a firm and its geographically distributed economic interests this study provides evidence that financial analysts issue less accurate more dispersed and more biased earnings forecasts for geographically dispersed firms we observe the degree to which a firm has an overlapping distribution of economic centers in comparison to industry competitors and suggest that geographically similar firms have lower information gathering costs and thereby more precise earnings forecasts empirical evidence supports this prediction we further find that the geographic dispersion across the u s is less likely to affect forecast precision when a firm has economic activities in states with highly correlated local shocks our findings suggest that the effect of geographic dispersion is more pronounced for soft information environments where information is more difficult to make impersonal by using technological advances consistent with the information asymmetry argument we find that geographically dispersed firms have less comparable and more discretionary managed earnings have less extensive than industry competitors segment information are more likely to restate sale segment information and issue annual and quarterly filings with a delay

conflicts of interest and analyst behavior evidence from recent changes in regulation regulation fd made analysts less dependent on insider information and diminished analysts motives to inflate their forecasts the global research analyst settlement had an even bigger impact on analyst behavior the mean forecast bias declined significantly whereas the median forecast bias essentially disappeared these results are similar for all analysts

financial analysts forecasts of earnings a better surrogate for market expectations abstract the specification of the market expectation of accounting numbers is a common feature of many empirical studies in accounting and finance givoly and lakonishok 1979 found that financial analysts forecasts have information content this study evaluates the quality of analysts forecasts as surrogates for the market expectation of earnings and compares it with that of prediction models commonly used in research results indicate that prediction errors of analysts are more closely associated with security price movements suggesting that analysts forecasts provide a better surrogate for market expectations than forecasts generated by time series models the study also identifies factors that might contribute to the performance of the financial analysts forecasts the broadness of the information set employed by analysts and to a lesser extent their reliance on information released after the end of the fiscal year appear to be important contributors to their performance

retracted relationship incentives and the optimistic pessimistic pattern in analysts forecasts we examine whether analysts incentives to maintain good relationships with management contribute to the optimistic pessimistic within period time trend in analysts forecasts in our experiments 81 experienced sell side analysts from two brokerage firms predict earnings based on historical information and management guidance analysts forecasts exhibit an optimistic pessimistic pattern across the two timing conditions early and late in the quarter and the effect is significantly stronger when the analysts have a good relationship with management than when their only incentive is to be accurate debriefing results indicate that analysts are aware of this pattern of forecasts and believe that this benefits their future relationships with management and with brokerage clients the analysts most frequently cite favored conference call participation and information access when describing benefits from maintaining good relationships with management our results suggest the following the optimistic pessimistic pattern in forecasts is in part a conscious response to relationship incentives information access is perceived to be a major benefit of management relationships and recent regulatory changes may have lessened but have not eliminated this conflict of interest source

inefficiency in analysts earnings forecasts systematic misreaction or systematic optimism a rational analysis of analyst behavior predicts that analysts immediately and without bias incorporate information into their forecasts several studies document analysts tendency to systematically underreact to information underreaction is inconsistent with rationality other studies indicate that analysts systematically overreact to new information or that they are systematically optimistic this study discriminates between these three hypotheses by examining the interaction between the nature of information and the type of reaction by analysts the evidence indicates that analysts underreact to negative information but overreact to positive information these results are consistent with systematic optimism in response to information the literature on financial analysts defines the phrase forecast inefficiency to mean forecasts that fail to accurately incorporate new information on a timely basis and or that are biased these forecasts have also been described as irrational or suboptimal prior studies report inefficiency in analysts forecasts finding that they are upwardly biased and inaccurately reflect available information some studies conclude from this that analysts underreact to information other studies conclude that analysts overreact if markets treat analysts forecasts as both rational and statistically optimal then inefficient forecasts could have important implications for the efficiency of pricing in securities markets in this paper we reexamine the apparent tendency of analysts to misinterpret earnings information the intent of this study is to discriminate between three hypotheses 1 that analysts systematically underreact to new earnings information 2 that analysts systematically overreact to new earnings information and 3 that analysts are systematically optimistic in their reactions for hypotheses 1 and 2 the direction of the misinterpretation i e underor overreaction is independent of the nature of the information received in contrast hypothesis 3 predicts that analysts are optimistic in interpreting

financial instability reserves and central bank swap lines in the panic of 2008 in this paper we connect the events of the last twelve months the panic of 2008 as it has been called to the demand for international reserves in previous work we have shown that international reserve demand can be rationalized by a central bank s desire to backstop the broad money supply to avert the possibility of an internal external double drain a bank run combined with capital flight thus simply looking at trade or short term debt as motivations for reserve holdings is insufficient one must also consider the size of the banking system m2 here we show that a country s reserve holdings just before the current crisis relative to their predicted holdings based on these financial motives can significantly predict exchange rate movements of both emerging and advanced countries in 2008 countries with large war chests did not depreciate and some appreciated meanwhile those who held insufficient reserves based on our metric were likely to depreciate current account balances and short term debt levels are not statistically significant predictors of depreciation once reserve levels are taken into account our model s typically high predicted reserve levels provide important context for the unprecedented u s dollar swap lines recently provided to many countries by the federal reserve this abstract was borrowed from another version of this item

the past present and future of macroeconomic forecasting he reports of the death of large scale macroeconomic forecasting models are not exaggerated but many observers interpret the failure of the early models as indicative of a bleak future for macroeconomic forecasting more generally such is not the case although the large scale macroeconomic forecasting models didn t live up to their original promise they nevertheless left a useful legacy of lasting contributions from which macroeconomic forecasting will continue to benefit they spurred the development of powerful identification and estimation theory computational and simulation techniques comprehensive machinereadable macroeconomic databases and much else moreover past failures do not necessarily imply a bleak future we learn from our mistakes just as macroeconomics has benefitted from rethinking since the 1970s so too will macroeconomic forecasting understanding the future of macroeconomic forecasting requires understanding the interplay between measurement and theory and the corresponding evolution of the nonstructural and structural approaches to forecasting nonstructural macroeconomic forecasting methods attempt to exploit the reduced form correlations in observed macroeconomic time series with little reliance on economic theory structural models in contrast view and interpret economic data through the lens of a particular economic theory structural econometric forecasting because it is based on explicit theory rises and falls with theory typically with a lag structural keynesian macroeconomic forecasting based on postulated systems of decision rules enjoyed a golden age in the 1950s and 1960s following the advances in keynesian theory in the 1930s and 1940s

estimating long run economic equilibria with stochastic trends an asymptotic theory is provided to analyze a menu of currently existing estimators of cointegrated systems we study in detail the single equation ecm seecm approach of hendry our theoretical results lead to prescriptions for empirical work such as specifying seecm s nonlinearly and including lagged equilibrium relationships rather than lagged differences of the dependent variable as covariates simulations support these prescriptions and point to problems of overfitting not encountered in the semiparametric approach of phillips and hansen 1990

when do central bank interventions influence intra daily and longer term exchange rate movements this paper examines dollar interventions by the g3 since 1989 and the reasons that trader reactions to these interventions might differ over time and across central banks market microstructure theory provides a framework for understanding the process by which sterilized central bank interventions are observed and interpreted by traders and how this process in turn might influence exchange rates using intra daily and daily exchange rate and intervention data the paper analyzes the influence of interventions on exchange rate volatility finding evidence of both within day and daily impact effects but little evidence that interventions influence longer term volatility