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

analyst reputation communication and information acquisition earlier studies have shown that reputational concerns tend to reduce agents opportunistic behavior however a recent study by morris argued that analysts experts reputational concerns may discourage truthful communication when they try to avoid being perceived as being misaligned with investors in this paper i examine the effect of reputational concerns on communication in a setting where analysts can choose their precision endogenously because both misaligned and aligned analysts want investors to trust their reports in the future both will aim to build a reputation for being aligned in equilibrium aligned analysts will acquire more information than misaligned analysts as a result investors may favorably update their beliefs about the analysts type when the report is proven to be accurate therefore both types of analysts will have reputational incentives to communicate truthfully the paper also derives conditions under which the analysts reputational concerns have a nonmonotonic impact on aligned analysts equilibrium precision choices and investors welfare

the characteristics of individual analysts forecasts in europe abstract this study investigates the determinants of financial analysts forecasts differential accuracy in 14 different european stock markets using the i b e s detail history database i find that european financial analysts forecast accuracy is positively associated with analyst firm specific experience forecast accuracy is negatively associated with the number of countries followed by analysts and the age of the forecast surprisingly i find no relationship between forecast accuracy and analysts job experience and the size of the bank employing the analyst

what a difference a month makes stock analyst valuations following initial public offerings we examine how analysts establish target prices for ipo firms and whether comparable firms used to support target prices are helpful in explaining ipo offer prices during the bubble period of 1999 to 2000 the average offer price was set at a discount relative to comparable firm valuations in contrast the average offer price was set at a small premium relative to comparables in the pre bubble period this shift appears to hold even after controlling for the differences in the types of firms going public during the bubble period moreover target prices of ipo firms were set at a higher premium relative to comparables during the bubble period while our results suggest that underwriters systematically dis counted offer prices during the bubble period an alternative explanation is that the shift arose because underwriters and analysts faced different incentives and legal exposures dur ing the bubble period

underreaction to industry wide earnings and the post forecast revision drift we test whether the post forecast revision drift is mainly attributable to investors underreaction to industry wide earnings news conveyed by analysts forecast revisions we find a large drift associated with industry wide earnings news but no drift associated with firm specific earnings news consistent with the functional fixation hypothesis we provide evidence that the post forecast revision drift is driven by investors underreaction to the higher persistence of industry wide earnings although prior research has focused on differential persistence of earnings components stemming from managerial reporting discretion we provide evidence suggesting that investors do not fully understand the differential earnings persistence attributable to industry fundamentals

information costs and liquidity effects from changes in the dow jones industrial average list we examine the stock market effect of changes in the composition of the dow jones industrial average djia unlike s p 500 listing studies we find that the price and the trading volume of newly listed djia firms are unaffected we attribute this result to a lack of index fund rebalancing since index trading is limited for most of our sample period and index funds mimic the s p 500 not the djia firms removed from the index however experience significant price declines we consider information signaling price pressure imperfect substitutes and information cost liquidity explanations for these asymmetric findings the evidence is consistent with the information cost liquidity explanation which holds that investors demand a premium for higher trading costs and for holding securities that have relatively less available information

an analysis of the recommendations of the superstar money managers at barron s annual roundtable the authors examine the performance of common stock recommendations made by prominent money managers at barron s annual roundtable from 1968 to 1991 to avoid survivorship bias they examine the performance of recommendations by all the participants the buy recommendations earn significant abnormal returns of 1 91 percent from the recommendation day to the publication day a period of about fourteen days however the abnormal returns are essentially zero for one to three year postpublication day holding periods thus an individual investing according to the roundtable recommendations published in in barron s would not benefit from the advice copyright 1995 by american finance association

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

testing an aggressive investment strategy using value line ranks a comment in the june 1981 journal of finance clark holloway reviews returns on a value line investments service vl market portfolio over the past fourteen years although he concludes vl does indeed have the ability to choose good stocks he is careful not to present that conclusion explicitly as an indictment of the efficient markets hypothesis holloway s hesitation is appropriate since the results of this and similar articles about value line are not inconsistent with efficient markets in the article holloway observes that the probability of value line s success by mere chance is only 0286 that observation is a misuse of statistics value line is only one of a number of investment advisory services it was not selected ex ante for this experiment it was selected precisely because it has been successful that value line has put together a string of market successes from 1965 to 1978 is no more significant than the fact that there are always a few gamblers ahead of the house in las vegas if in efficient markets chances of success are about one in two the probability of a randomly selected investment advisory service suffering only three bad years out of 14 is indeed 0286 but out of a population of say 20 investment advisory services the probability of finding at least one with three or less bad years out of 14 is 44 in fact it would only take 24 investment services to give you a betterthan even chance of finding at least one as good as value line that the firm would want to advertise that success is certainly no surprise nor is it surprising that a number of businessmen and academics would notice how well value line has performed against the average but holloway and others have only focused on a firm in the tail of a standard binomial distribution and that doesn t contradict the existence of the distribution itself over 14 years an advisory service in the other tail 3 out of 14 losers will probably have gone out of business whatever clark holloway s intention his results are likely to be misunderstood this is not evidence of a capability systematically to beat the market the statistical experiment is wrongly conceived but if value line performs equally well in the future i promise to discard my faith in efficient markets

the effect of price targets on the composition of ceo pay abstractthis article analyzes the impact of price targets from the ibes detail price history target database on ceo compensation retained from execucomp the two databases are merged at fiscal year frequency and an ols regression with fixed effect is used to analyze the impact of price target on ceo compensation the analysis reveals that analysts price targets affect top executives compensation when analysts predict a growth in the share price for a company the compensation package tilts towards stock options when analysts forecast a drop in the share price the compensation package tilts towards cash based compensation and restricted stocks i argue that the result is more aligned with the managerial power model of compensation which assumes the board of directors maximizes managers compensation than with the arm s length bargaining model that states that managers compensation is set to maximize shareholders profit

the role of financial analysts in the strategy formation process of business firms increasingly financial analysts are influencing the strategy formation process of corporations but so far little attention has been paid to the complex processes of interaction and the corresponding strategic outcomes this article discusses these influences through different theoretical lenses strategic management finance and accounting theory and economic sociology institutional and systems theory based on case study evidence from three companies we describe how the interactions between financial analysts and business firms take place and formulate several propositions on the relationship between financial analysts and business firms as well as on its influence on the strategic outcome of business firms the results suggest that the influence of financial analysts is indeed significant but depends on a number of contextual factors such as the financial situation of the company or the need for capital practicing managers can learn how to handle a turbulent environment such as the financial analyst community and how they can change their planning processes to absorb as much information as possible

information content of equity analyst reports abstract we catalog the complete contents of institutional investor all american analyst reports and examine the market reaction to their release including the justifications supporting an analyst s opinion reduces and in some models eliminates the significance of earnings forecasts and recommendation revisions analysts both provide new information and interpret previously released information the information in a report is most important for downgrades target prices and the analyst s justifications are the only significant elements for reiterations no correlation exists between valuation methodology and either analyst accuracy or the market s reaction to a report our adjusted r 2 s are much larger than those of studies using only summary measures

sell side analysts career concerns during banking stresses we propose a new approach to examine sell side analysts career concerns by relating their forecast boldness to their employers news flows specifically we use banking sector news to proxy for the severity of career concerns analysts follow more closely the consensus forecast when the prospects of the banking sector are negative and vice versa the effect is both economically and statistically significant after controlling for various firm analyst brokerage house and forecasting characteristics as well as sector and economy wide effects the more established analysts in terms of reputation and experience are generally unaffected by banking sector news in contrast their less established peers tend to cluster their forecasts near the consensus after a sequence of negative news flows for banks collectively our results support the notion that during banking stresses when job security is low analysts tendency to imitate others increases

does drawing down the us strategic petroleum reserve help stabilize oil prices we study the effects of releases from the us strategic petroleum reserve spr within the context of fully specified models of the global oil market that explicitly allow for storage demand as well as unanticipated changes in the spr we show that historically spr policy interventions defined as sequences of exogenous spr shocks during selected periods have helped stabilize the price of oil their effect on the price of oil however has been modest for example the cumulative effect of the spr releases after the invasion of kuwait in 1990 was a reduction of 2 per barrel in the real price of oil after 7 months whereas emergency drawdowns tend to lower the real price of oil we find that exchanges tend to raise the real price of oil in the long run we also provide a detailed analysis of the benefits of the 2018 white house proposal to sell off half of the spr within the next decade we show that the expected fiscal benefits of this plan are somewhat higher than the revenue of 16 6 billion dollars projected by the white house

valuing and pricing ipos abstract this paper investigates how underwriters set the ipo firm s fair value an ex ante estimate of the market value using a unique dataset of 228 reports from french underwriters these reports are issued before the ipo shares start trading on the stock market and detail how underwriters determined fair value we document that underwriters often employ multiples valuation dividend discount models and discounted cash flow dcf analysis to determine fair value but that all of these valuation methods suffer from a positive bias with respect to equilibrium market value we also analyze how this fair value estimate is subsequently used as a basis for ipo pricing we report that underwriters deliberately discount the fair value estimate when setting the preliminary offer price part of the intentional price discount can be recovered by higher price updates we find that controlling for other factors such as investor demand part of underpricing stems from this intentional price discount

do investors see through mistakes in reported earnings this study investigates whether investors see through materially misstated earnings and whether they anticipate earnings restatements for firms that restate at least one annual report we find that investors are misled by mistakes in reported earnings at the time of initial earnings announcements investors react positively to the component of the favorable earnings surprise that will subsequently be restated and they attach the same valuation to it as to the true earnings surprise we also find that investors anticipate the subsequent downward restatements and start marking stock prices down several months before a restatement announcement so that the full impact of a restatement is about three times as large as the restatement announcement effect indeed we show that investors punish restating firms because the stock price gains that shareholders enjoy when firms initially announce overstated earnings are more than reversed by the time of the restatement announcement

what affects the market s ability to adjust for optimistic forecast bias evidence from experimental asset markets abstract this study uses experimental asset markets to investigate the effects of experience and common knowledge on a market s ability to adjust for optimistic forecast bias as a baseline we find that period end prices reflect unbiased forecasts in markets with private information and inexperienced traders with low bias forecasts traders need experience before price adjusts for the bias with high bias forecasts traders need experience and public forecast releases before price adjusts for the bias overall our findings provide insight into identifying conditions that are critical for the full revelation of biased imperfect forecasts and provide direction for future theoretical work

a study of financial analysts practice and theory the study reported here focused on determining what analytical techniques financial analysts who are members of aimr actually use the study achieved a response rate of 33 75 percent questions covered 16 areas including the use of present value analysis the importance of quarterly earnings announcements in decision making belief in efficient markets acceptance or rejection of market anomalies and belief in the importance of international diversification for risk reduction

can analysts assess fundamental risk and valuation uncertainty an empirical analysis of scenario based value estimates abstract we use a data set of sell side analysts scenario based equity valuation estimates to examine whether analysts can assess the state contingent risk surrounding a firm s fundamental value we find that the spread in analysts scenario based valuations captures the riskiness of operations and predicts the absolute magnitude of long run valuation errors and future changes in firm fundamentals we also show that analysts assessment of fundamental risk and its predictive ability systematically improved after the financial crisis consistent with the macroeconomic shock raising analysts awareness of firms systematic risk exposures

do analysts generate trade for their firms evidence from the toronto stock exchange abstract it has generally been assumed that the potential commission revenue is an important determinant of a sell side analyst s decision of what firms to cover and what information to publicly release however because stock volume has not been disaggregated on a brokerage firm level uncertainty remains regarding the economic importance of the relation between analyst coverage and brokerage firm volume using a unique data set that identifies the broker s involved in each trade i find that brokerage volume is significantly higher in covered stocks than in uncovered stocks on average brokers increase their market share in covered stocks by 3 8 relative to uncovered stocks

the effect of oil supply shocks on us economic activity what have we learned estimated responses of real oil prices and us gross domestic product gdp to oil supply disruptions vary widely we show that most variation is attributable to differences in identification assumptions and in the model specification models that allow for a large short run price elasticity of oil supply imply a larger response of oil prices and a larger longer lived contraction in us real gdp we find that if we condition on a range of supply elasticity values supported by microeconomic estimates the differences in the oil price responses diminishes we also examine the role of lag length of using pre 1973 data alternative measures of real economic activity and using the median response function instead of the modal structural model

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

the informative role of the value line investment survey evidence from stock highlights i examine abnormal stock returns associated with stock highlights published by the value line investment survey at the time of their publication stock highlights elicit strong positive abnormal returns they also have positive abnormal returns at the time of the earnings announcement preceding stock highlight publications post earnings announcement drift is present but is much too small to explain abnormal returns at the time of the publication of stock highlights thus value line stock highlights provide useful information to investors this information is rapidly reflected in stock prices consistent with market efficiency

quantifying the speculative component in the real price of oil the role of global oil inventories abstract one of the central questions of policy interest in recent years has been how many dollars of the inflation adjusted price of oil must be attributed to speculative demand for oil stocks at each point in time we develop statistical tools that allow us to address this question and we use these tools to explore how the use of two alternative proxies for global crude oil inventories affects the empirical evidence for speculation notwithstanding some differences overall these inventory proxies yield similar results while there is evidence of speculative demand raising the price in mid 2008 by between 5 and 14 dollars depending on the inventory specification there is no evidence of speculative demand pressures between early 2003 and early 2008 as a result current policy efforts aimed at tightening the regulation of oil derivatives markets cannot be expected to lower the real price of oil in the physical market we also provide evidence that the libyan crisis in 2011 shifted expectations in oil markets resulting in a price increase of between 3 and 13 dollars depending on the inventory specification with regard to tensions with iran in 2012 the implied price premium ranges from 0 to 9 dollars

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

analysts and anomalies abstract analysts price targets and recommendations contradict stock return anomaly variables using an index based on 125 anomalies we find that analysts annual stock return forecasts are 11 higher for anomaly shorts than for anomaly longs anomaly shorts return forecasts are excessively optimistic exceeding realized returns by 34 recommendations also tend to be more favorable for anomaly shorts although this result varies across anomaly types consistent with analysts slowly incorporating anomaly information anomalies forecast revisions in both price targets and recommendations our findings imply that investors who follow analysts actionable information contribute to mispricing

timid choices and bold forecasts decision makers have a strong tendency to consider problems as unique they isolate the current choice from future opportunities and neglect the statistics of the past in evaluating current plans

narrative sign restrictions for svars we identify structural vector autoregressions using narrative sign restrictions narrative sign restrictions constrain the structural shocks and or the historical decomposition around key historical events ensuring that they agree with the established narrative account of these episodes using models of the oil market and monetary policy we show that narrative sign restrictions tend to be highly informative even a single narrative sign restriction may dramatically sharpen and even change the inference of svars originally identified via traditional sign restrictions our approach combines the appeal of narrative methods with the popularized usage of traditional sign restrictions

the total cost of transactions on the nyse this paper develops a measure of execution costs market impact of transactions on the nyse the measure is the volume weighted average price over the trading day it yields results that are less biased than measures that use single prices such as closes the paper then applies this measure to a data set containing more than 14 000 actual trades we show that total transaction costs commission plus market impact costs average twenty three basis points of principal value for our sample commission costs averaging eighteen basis points are considerably higher than execution costs which average five basis points they vary slightly across brokers and significantly across money managers though brokers do not incur consistently high or low transaction costs money managers experience persistently high or lost costs finally the paper explores the possible tradeoff between commission expenditures and market impact costs paying higher commissions does not yield commensurately lower execution costs even after adjusting for trade difficulty we cannot determine whether other valuable brokerage services are being purchased with higher commission payments or whether some money managers really are inefficient consumers of brokerage trading services recent years have witnessed an explosion of institutional trading on the nation s stock exchanges in 1970 only 17 000 trades of blocks of 10 000 or more shares were done on the new york stock exchange these accounted for merely fifteen percent of total volume in 1984 there were 433 000 such block trades accounting for fifty percent of volume these trades are costly and in an informationally efficient stock market cannot help but have a deleterious effect on the investment performance of institutional investors

stock and option market divergence in the presence of noisy information we examine market behavior of the stock and option markets upon the arrival of noisy information in the form of cnbc s mad money recommendations if stock and option markets are not equally efficient they should respond differently to noisy information with the less efficient market more susceptible to noise we find that the stock market is less efficient than the option market the abnormal difference between option implied and actual stock returns is negative and significant upon exposure to noisy information this difference may yield an economically significant monthly trading profit of up to 5 we conclude that the stock market is more susceptible to noisy information than the option market and is therefore less efficient published by elsevier b v

drawing conclusions from structural vector autoregressions identified on the basis of sign restrictions abstract this paper discusses the problems associated with using information about the signs of certain magnitudes as a basis for drawing structural conclusions in vector autoregressions we also review available tools to solve these problems for illustration we use dahlhaus and vasishtha s 2019 study of the effects of a u s monetary contraction on capital flows to emerging markets we explain why sign restrictions alone are not enough to allow us to answer the question and suggest alternative approaches that could be used

do weather induced moods affect the processing of earnings news we investigate whether unpleasant environmental conditions affect stock market participants responses to information events we draw from psychology research to develop a new prediction that weather induced negative moods reduce market participants activity levels exploiting geographic variation in equity analysts locations we find compelling evidence that analysts experiencing unpleasant weather are slower or less likely to respond to an earnings announcement relative to analysts responding to the same announcement but experiencing pleasant weather price association tests find evidence consistent with reduced activity due to weather induced moods delaying equilibrium price adjustments following earnings announcements we also use our analyst based research design to re examine an existing prediction that unpleasant weather induces investor pessimism and find evidence of both analyst pessimism and reduced activity in the presence of unpleasant weather together our study provides new evidence that both extends and reaffirms findings of a relation between unpleasant weather and market activities and contributes to the broader psychology and economics literature on the impact of weather induced mood on labor productivity this article is protected by copyright all rights reserved

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

do security analysts exhibit persistent differences in stock picking ability abstract we investigate whether security analysts exhibit persistence in their stock picking ability we find that analysts whose recommendation revisions earned the most least excess returns in the past continue to outperform underperform in the future further the market recognizes these performance differences in the five day period surrounding the recommendation revision this market reaction however is incomplete excess returns in the one and three trading months following the revision are significant and positively associated with analysts prior performance however a trading strategy taking long short positions in recommendation upgrades downgrades conditional on analysts prior performance is unprofitable

global economic activity indexes revisited abstract this study contributes to the debate about two measures of global real economic activity real shipping costs and world industrial production we show that once both measures are transformed in the same way both can predict commodity prices moreover we demonstrate that real shipping costs lead world industrial production

vested interest and biased price estimates evidence from an auction market this study employs a new data set from art auctions to examine the relationship between auctioneer presale price estimates and the long term performance of artworks we find that the price estimates for expensive paintings have a consistent upward bias over a long period of 30 years high estimates at the time of purchase are associated with adverse subsequent abnormal returns moreover the estimation error for individual paintings tends to persist over time these results are consistent with the view that auction house price estimates are affected by agency problems and that

monetary policy corporate profit and house prices by using portfolio theory we explain the highly observed correlation between the seemingly unrelated corporate profit and house prices in the united states we test the predictions of the underlying model using a vector autoregression representation and find the data to be supportive of the theory monetary impulses explain high correlation as both corporate profit and house prices exhibit similar dynamics in response to a monetary impulse robustness checks are presented by using the federal funds rate instead of the monetary base as a measure of the stance of monetary policy and by using other model variations in all cases the results are robust

reputation and performance among security analysts members of the institutional investor all american research team supply more accurate earnings forecasts than other analysts when forecasts are matched by the corporation followed and by the date of brokerage house issuance this contemporaneous advantage is complemented by a timing advantage all americans supply forecasts more often than other analysts stocks returns immediately following large upward forecast revisions suggest that all americans impact prices more than other analysts however there is virtually no difference in returns following large downward revisions nevertheless the collective results suggest a positive relation between reputation and performance and assuming that all americans are better paid pay and performance

the informational role of bond analysts this study uses a large sample of sell side bond analysts reports to examine the properties of recommendations provided by bond analysts and the impact of these recommendations on bond securities first we document that the distribution of bond analysts buy hold and sell recommendations is skewed positively but less so than the distribution of equity analysts recommendations the positive skewness in bond analysts recommendations is greater for

stock prices and the dissemination of analysts recommendation this article investigates alternative explanations for the significant stock price reaction to analysts information reported in the heard on the street column of the wall street journal the observed market reaction persists after eliminating firms with confounding releases and firms for which analysts reports are issued immediately prior to publication the evidence indicates that the column is not usually a secondary dissemination first stock prices adjust prior to publication when recommendations are reported on a single firm second analysts have incentives to release information to the column before disseminating it to their clients overall the evidence suggests that the heard on the street column gathers information forms a consensus and provides it to investors copyright 1991 by university of chicago press

monetary policy surprises and interest rates evidence from the fed funds futures market abstract this paper estimates the impact of monetary policy actions on bill note and bond yields using data from the futures market for federal funds to separate changes in the target funds rate into anticipated and unanticipated components interest rates response to anticipated target rate changes is small while their response to unanticipated changes is large and highly significant these responses are generally consistent with the expectations hypothesis of the term structure surprise target rate changes have little effect on expectations of future actions however which helps to explain the lack of empirical support for the expectations hypothesis at the short end of the yield curve

mutual fund trades and the value of contradictory private information abstract we investigate the performance of mutual funds that trade using private information these funds are uniquely identified from a set of 2730 funds with 44 315 fund periods between 1994 and 2005 we compare the alignment of fund trades with brokers recommendations which we regard as public information in the universe of informed and uninformed mutual funds funds that systematically trade counter to the public information form a homogenous subset of the privately informed funds by using private information that contradicts the public information these funds exhibit a superior average performance after we control for serial correlation in fund returns we assess this advantage as being an economically significant 1 7 per annum we also show empirically that smaller funds are better able to capture the benefit of private information

signalling by underpricing in the ipo market abstract empirical evidence suggests the existence of hot issue markets for initial public offerings in certain periods and in certain industries new issues are underpriced and rationing occurs this paper develops a model consistent with this observation which assumes the firm itself best knows its prospects in certain circumstances firms with the most favorable prospects find it optimal to signal their type by underpricing their initial issue of shares and investors know that only the best can recoup the cost of this signal from subsequent issues

what do the vars mean measuring the output effects of monetary policy abstract vars describe the history of output and other variables following monetary shocks to measure the effects of monetary shocks one must add economic identifying assumptions i specify the relative effects of anticipated and unanticipated money and i calculate how var based measures of the effect of money on output change as one varies this assumption the anticipated unanticipated assumption influences measured output effects as much or more than the variable selection and shock orthogonalization assumptions on which the var literature focuses assuming that anticipated monetary policy can have some effect on output results in much shorter smaller and perhaps more believable estimates of the output response to monetary shocks

refining the workhorse oil market model the kilian and murphy journal of applied econometrics 2014 29 454 478 structural vector autoregressive model has become the workhorse model for the analysis of oil markets i explore various refinements and extensions of this model including the effects of 1 correcting an error in the measure of global real economic activity 2 explicitly incorporating narrative sign restrictions into the estimation 3 relaxing the upper bound on the impact price elasticity of oil supply 4 evaluating the implied posterior distribution of the structural models and 5 extending the sample i demonstrate that the substantive conclusions of kilian and murphy 2014 are largely unaffected by these changes

what factors drive analyst forecasts using survey data to judge how analyst forecasts are related to evaluations of companies industry competitiveness strategic choices and internal capabilities the authors found that analyst forecasts are associated with many of the factors that money managers rate as important in their assessments of analyst contributions they also found wide variation in ratings consistency across variables among analysts covering the same company on average consistency is higher for sell side analysts than for buy side analysts

modeling fluctuations in the global demand for commodities it is widely understood that the real price of globally traded commodities is determined by the forces of demand and supply one of the main determinants of the real price of commodities is shifts in the demand for commodities associated with unexpected fluctuations in global real economic activity

conflict of interest and the credibility of underwriter analyst recommendations brokerage analysts frequently comment on and sometimes recommend companies that their firms have recently taken public we show that stocks that underwriter analysts recommend perform more poorly than buy recommendations by unaffiliated brokers prior to at the time of and subsequent to the recommendation date we conclude that the recommendations by underwriter analysts show significant evidence of bias we show also that the market does not recognize the full extent of this bias the results suggest a potential conflict of interest inherent in the different functions that investment bankers perform

event study methodologies and the size effect abstract this study of 862 press recommendations demonstrates that the size effect can distort longer term performance measures and hence event studies relative to similar sized companies post publication performance is neutral however market adjustments the capm and market model with equally or capitalization weighted indexes all produce biased results event studies are most exposed to such bias when the measurement interval is long event securities differ systematically in size or weighting from the index constituents the size effect is large and or volatile and when capm type methodologies are used these distortions are avoided by explicitly controlling for size

information aggregation in polls we study information transmission via polling a policymaker polls constitu ents who differ in their information and ideology to determine policy full rev elation is an equilibrium in a poll with a small sample but not with a large one in large polls full information aggregation can arise in an equilibrium where constituents endogenously sort themselves into centrists who respond truth fully and extremists who do not we find polling statistics that ignore strate gic behavior yield biased estimators and mischaracterize the polvs margin of error we construct estimators that account for strategic behavior finally we compare polls and elections jel c42 d83

were there regime switches in u s monetary policy working paper 2004 14 june 2004 abstract a multivariate model identifying monetary policy and allowing for simultaneity and regime switching in coefficients and variances is confronted with u s data since 1959 the best fit is with a model that allows time variation in structural disturbance variances only among models that also allow for changes in equation coefficients the best fit is for a model that allows coefficients to change only in the monetary policy rule that model allows switching among three main regimes and one rarely and briefly occurring regime the three main regimes correspond roughly to periods when most observers believe that monetary policy actually differed and the differences in policy behavior are substantively interesting though statistically ill determined the estimates imply monetary targeting was central in the early 80s but was also important sporadically in the 70s the changes in regime were essential neither to the rise in inflation in the 70s nor to its decline in the 80s jel classification e52 e47 c53 key words counterfactuals lucas critique policy rule monetary targeting simultaneity volatility model comparison i the debate over monetary policy change in an influential paper clarida gali and gertler 2000 cgg presented evidence that us monetary policy changed between the 1970 s and the 1980 s indeed that in the 70 s it was drastically worse they found that the policy rule apparently followed in the 70 s was one that when embedded in most stochastic general equilibrium models would imply non uniqueness of the equilibrium and hence vulnerability of the economy to sunspot fluctuations of arbitrarily large size their estimated policy rule for the later period on the other hand eliminated this indeterminacy these results are a possible explanation of the volatile and rising inflation of the 70 s and of its subsequent decline the cgg analysis has two important weaknesses one is that it fails to account for stochastic volatility us macroeconomic variables and particularly the federal funds rate have gone through periods of tranquility and of agitation with forecast error variances varying greatly from period to period ignoring such variation does not lead to inconsistent estimates of model parameters when the forecasting equations themselves are constant but it strongly biases toward a finding of changed parameters tests of the stability of the forecasting equations the other weakness is that the cgg analysis rests on powerful and implausible identifying assumptions they require that we accept that the response of the monetary authority to expected future inflation and output does not depend on the recent history of inflation money growth or output it is hard to understand why this should be so especially in the 70 s when monetarism was a prominent theme in policy debates congress was requiring reports from the fed of projected time paths of monetary aggregates and financial markets were reacting sensitively to weekly money supply numbers the requirement for existence and uniqueness of equilibrium in dynamic models is that the monetary policy rule show a more than unit response of interest rates to the sum of the logs of all nominal variables that appear on the right hand side of the reaction function if we force a particular measure of expected future inflation to proxy for all the nominal variables that actually appear independently in the reaction function we are bound to get distorted conclusions on the one hand because expected future inflation will be a noisy measure of the full set of nominal influences on policy we might get downward bias in our estimates from the usual errorsin variables effect on the other hand to the extent that expected future inflation like most expected future values shows less variation than current nominal variables we could find a mistaken scaling up of coefficients

do financial analysts long term growth forecasts matter evidence from stock recommendations and career outcomes abstract prior literature portrays long term growth ltg forecasts as nonsensical from a valuation perspective instead we hypothesize that ltg forecasts signal high effort and ability to analyze firms long term prospects we document stronger market response to stock recommendation revisions of analysts who publish accompanying ltg forecasts we also hypothesize and find that these analysts are less likely to leave the profession or move to smaller brokerage houses consistent with reg fd s intention to promote fundamental analysis of long term earnings prospects post reg fd observations drive our results overall we identify previously undocumented benefits accruing to analysts who publish ltg forecasts

do measures of monetary policy in a var make sense no in many vector autoregressions vars monetary policy shocks are identified with the least squares residuals from a regression of the federal funds rate on an assortment of variables such regressions appear to be structurally fragile and are at odds with other evidence on the nature of the u s federal reserve s reaction function furthermore the residuals from these regressions show little correlation across various vars or with funds rate shocks that are derived from forward looking financial markets my results provide a sharp critique of current monetary vars

hotelling under pressure we show that oil production from existing wells in texas does not respond to oil prices while drilling activity and costs respond strongly to explain these facts we reformulate hotelling s class

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

firm characteristics and analyst following abstract this paper examines the major determinants of the number of analysts following a firm a simple model of analyst following is proposed and several firm characteristics are suggested that are likely to influence the extent of a firm s analyst following by either affecting the aggregate demand for or supply of analyst services or both for the firm almost all of these characteristics are found to be strongly significant in affecting the extent of analyst following of firms and the empirical results generally accord well with economic intuition

on the relationship between analyst reports and corporate disclosures exploring the roles of information discovery and interpretation abstract we examine the relationship between analyst research and corporate earnings announcements to explore the relative importance of information discovery versus interpretation of previously released information using equity market reaction to capture information content we find that information discovery interpretation dominates in the week before after firms announce their earnings in addition we find that the interpretation role increases in importance with the difficulty of financial accounting information analysis of all weeks surrounding earnings announcements shows that the information discovery role is overall more important we are able to reconcile this result with the opposite finding in francis et al 2002

the effect of issuing biased earnings forecasts on analysts access to management and survival this study offers evidence on the earnings forecast bias analysts use to please firm management and the associated benefits they obtain from issuing such biased forecasts in the years prior to regulation fair disclosure analysts who issue initial optimistic earnings forecasts followed by pessimistic earnings forecasts before the earnings announcement produce more accurate earnings forecasts and are less likely to be fired by their employers the effect of such biased earnings forecasts on forecast accuracy and firing is stronger for analysts who follow firms with heavy insider selling and hard to predict earnings the above results hold regardless of whether a brokerage firm has investment banking business or not these results are consistent with the hypothesis that analysts use biased earnings forecasts to curry favor with firm management in order to obtain better access to management s private information

stick to the fundamentals and discover your peers the use of industry as a criterion for selecting peers for multiples based valuation rests on the notion that companies operating in the same industry are more likely to share fundamental value drivers i e profitability growth and risk however such companies may not have similar characteristics in terms of these drivers and thus should not be traded at the same multiple we analyze this issue by developing the sum of absolute rank differences sard approach the sard approach can account for an infinite number of proxies for profitability growth and risk while remaining independent of industry classifications our results indicate that the sard approach yields significantly more accurate valuation estimates than the industry classification approach

stock price reactions to the wall street journal s securities recommendations this paper examines the impact of the heard on the street hots column of the wall street journal on common stock prices the results of the study indicate that the hots column appears to have an impact on stock prices on the publication day however we also find a smaller but statistically significant impact on two days preceding the pub lication the significant abnormal returns on these days are associated with higher trading volume the reaction of stock prices is symmetric with respect to the buy and sell recom mendations and the impact of single company recommendations is greater than the im pact of the multi company recommendations i introduction the efficient market hypothesis assumes that security prices fully and instantaneously reflect all available information considerable evidence has been accumulated during the past decades in support of the hypothesis the acceptance of the hypothesis has raised questions about the economic value of professional investment advice if the market is efficient then the management of port folios based on these recommendations should not consistently outperform the market why then are investors still willing to pay for this information examples of the advice include low cost financial publications brokerage house rec ommendations and subscription financial newsletters that sell for hundreds of dollars recent studies argue that investment advisors can provide information to investors at a lower cost than the investors cost of information production millon and thakor 1985 develop a model that explains the existence of investment advisory agencies they argue that if the information of investment advisory agencies permits security analysts to share information about common uncertainties that affect the value of firms as a whole such as the return on the market portfolio then investment advisory agencies can produce information more cheaply than individual investors this model is consistent with the study of