Performance Of Analysts Research Articles

The Performance of Equity Analysts During the Global Financial Crisis

This paper investigates the response of equity analysts following Australian and US listed stocks to the onset of the 2007 Global Financial Crisis. Both groups of analysts reacted quickly by adjusting their forecasts downwards, and initially tending towards being overly pessimistic. Relative to pre‐crisis data, the authors identify sharp declines in earnings forecasts, an increase (decrease) in downward (upward) revisions, and a downward (upward) trend in sell (buy) recommendations. Forecast errors are larger, and dispersion of earnings forecasts is higher. Finally, the most accurate analysts in the pre‐crisis period continue to be significantly more accurate during the crisis period than their peers.

Analyst's earnings estimates for publicly traded food companies: How good are they?

Professional analysts' estimates of earnings per share (EPS) provide a rare source of forward-looking information regarding the financial performance of publicly traded firms. Although numerous studies in the economics, finance, and accounting literatures have examined the properties of these forecasts and provided general insight into their performance, no known research explicitly examines the performance of analysts' EPS estimates for publicly traded food companies. This issue is particularly relevant given the influence that publicly traded agribusiness companies maintain in the agro-food supply chain (Vickner, 2002). Focusing on quarterly consensus estimates of EPS for 11 of the largest publicly traded food companies based on capitalization, the authors examine the point accuracy of these estimates through the introduction of the mean absolute scaled error measure, their performance over time, as well as their optimal forecast properties of bias, efficiency, and forecast encompassing. Results suggest that professional analysts, on average, produce EPS estimates that are more accurate than time series alternatives, yet the differences are often not statistically significant. For many of the firms examined, analysts' EPS estimates are found to be biased, inefficient, and do not encompass information in simple time series alternatives. For many firms in the sample, forecast accuracy has decreased over time. However, it is difficult to determine if this decline in forecast accuracy is due to turnover of analysts in the wake of increased financial market regulation (e.g., Sarbanes-Oxley), decline in forecasting skill, or structural changes in the food industry, which make it more difficult to forecast earnings over time. [EconLit citations: Q140; G170; M490]. © 2010 Wiley Periodicals, Inc.

The Stock Selection and Performance of Buy-Side Analysts

Prior research on equity analysts focuses almost exclusively on those employed by sell-side investment banks and brokerage houses. Yet investment firms undertake their own buy-side research, and their analysts face different stock selection and recommendation incentives than their sell-side peers. We examine the selection and performance of stocks recommended by analysts at a large investment firm relative to those of sell-side analysts from mid-1997 to 2004. We find that the buy-side firm's analysts issue less optimistic recommendations for stocks with larger market capitalizations and lower return volatility than their sell-side peers, consistent with their facing fewer conflicts of interest and having a preference for liquid stocks. Tests with no controls for these effects indicate that annualized buy-side strong buy/buy recommendations underperform those for sell-side peers by 5.9% using market-adjusted returns and by 3.8% using four-factor model abnormal returns. However, these findings are driven by differences in the stocks recommended and their market capitalization. After controlling for these selection effects, we find no difference in the performance of the buy- and sell-side analysts' strong buy/buy recommendations.This paper was accepted by Mary Barth, accounting.

Initial Placement and Analyst Performance

Initial Placement and Analyst Performance

A comparative analysis of the CABAS® model of education at the Fred S. Keller School: A twenty-year review.

The Comprehensive Application of Behavior Analysis to Schooling, or CABAS[R], model of education has been in existence for almost three decades. CABAS[R] is a data-driven, researchbased system that takes into account the interdependent relationship between teachers, students and their parents, and school supervisory personnel, whose primary function is to train and mentor teachers to continually apply the principles and tactics of the science of behavior to ensure student success. A university graduate training program ensures that the training incorporates the latest scientific findings and consultation to board certified schools by CABAS[R] Professional Advisory Board members, who are themselves senior behavior analysts and research scientists, ensures the accurate implementation of all components of the CABAS[R] model. Students are at the center of the system and it is continuous measurement of their behaviors that provides evidence of the effectiveness of the system. CABAS[R] also includes a behavioral parent education program (please refer to Greer, 2002 or Greer, Keohane, & Healy, 2002) for a full description of these CABAS[R] components). All those involved are responsive to student data, at the level of the individual child, classroom, or school as a whole. CABAS[R] is a cybernetic system, at the heart of which lie the students. Our students' achievement is directly tied to their teachers' expertise (Greer, 2002; Greer, et al, 2002). Students learn only as fast as their teachers can teach them. The amount of instruction received (measured in learn units, described later in this paper) and the number of objectives achieved by students is a direct measure of teacher behavior. And, those objectives are tied directly to state standards, so our teachers are accountable at all levels for the achievement of their students. Our model is designed such that, just as teachers are responsible for their students' achievement, teacher mentors and behavior analyst supervisors are responsible for the performance of their teachers. And beyond that, CABAS[R] consultants and university faculty are responsible for the performance of teacher mentors and behavior analysts. CABAS[R] meets the criteria set forth by the No Child Left Behind act (NCLB), including: 1) accountability for results, as evidenced by a set of measures reflecting both teacher and student performance across the entire school year, 2) scientifically-based instruction, as evidenced by the use of tactics from the research literature of the science of behavior, 3) highly qualified teachers and teaching assistants, accomplished through a three-tiered personalized system of instruction that includes a teacher training and observation component as well as other outcome-based measures of teacher expertise, and 4) assessment of individualized student progress, including the use of criterion-referenced assessments and curricula tied to state standards. The CABAS[R] model also contains components which meet the definition of a Response to Instruction Model (RTI) (Vaughn & Fuchs, 2003) in that 1) all students are assessed for repertoires and capabilities, 2) responses to instruction are monitored, 3) data are analyzed and a course of action is determined, 4) all decisions regarding interventions are individualized to the specific student and 5) the integrity of the implementation of tactics is closely monitored. Interventions in an RTI model are multi-tiered, with students who are not responding to intervention moving to a more rigorous or simply different tier of intervention. Our decision analysis protocol, described later in this paper, was designed to analyze learning problems within the context of the instructional setting and, in response, implement appropriate tactics based on where the learning problem existed (e.g., lack of prerequisite skills; motivation, instructional history, conditioned reinforcement). In summary, the CABAS[R] model of education employs a science of pedagogy to all aspects of teaching and learning. …

The Nexus between Analyst Forecast Dispersion and Expected Returns Surrounding Stock Market Crashes

The performance of analysts’ forecasts has attracted increasing attention in recent years. However, as yet, no empirical study has investigated the nexus between the analyst forecast dispersion (AFD) and excess returns surrounding stock market crashes in any depth. This paper attempts to fill this void by estimating a Fama-French model regression with AFD as a factor. Instead of an expected linear relationship, a nonlinear U-shape relationship between the AFD and excess returns is found.

Information footholds: Isolating local presence as a factor in analyst performance and trading

I compare the performance of buy/hold/sell recommendations from foreign, local, and expatriate (foreigners with local operations) analysts in an emerging market. Location appears to be important: expatriate analysts significantly outperform foreign analysts. Expatriates also significantly outperform locals, implying that other factors such as global resources also play a role, and a variety of controls for the characteristics of the recommending firm does not alter findings. Trading based on expatriate recommendations generates significantly positive risk-adjusted returns. Furthermore, foreign and local institutional investors appear to trade on the superior information of expatriate analysts, even when it contradicts their own information.

The Performance of Analysts with a CFA® Designation: The Role of Human-Capital and Signaling Theories

The Performance of Analysts with a CFA^® Designation: The Role of Human-Capital and Signaling Theories

Independents’ day? Analyst behavior surrounding the Global Settlement

In this paper, we examine the impact of NASD Rule 2711, NYSE Rule 472, and the Global Research Settlement on the recommendation performance of independent, affiliated, and unaffiliated analysts. We find that analysts from all three types of institutions issued fewer strong buys following these regulations designed to separate investment banking and equity research. Affiliated analysts were less likely to issue innovative recommendations. While downgrades became more prevalent following the regulations, they were significantly less informative. Independent research firms set up after the Global Research Settlement are of inferior quality; they issue more optimistic and less innovative recommendations that generate lower announcement period returns than independent firms existing prior to the Settlement. Our overall findings question whether investors will be better served via the shift in equity research to analysts at independent research firms.

Where Corporate Governance and Financial Analysts Affect Valuation

AbstractWe examine whether corporate governance and financial analysts affect accounting‐based valuation models for B and H shares traded by foreign investors in China and Hong Kong, respectively. We expect that better corporate governance and more effective analyst activity mitigate potential adverse effects on accounting valuation models generated by country‐specific problems in accounting, auditing, and legal systems. We find that valuation models perform better for companies with a greater analyst following, smaller forecast errors, relatively high public ownership and a strong board structure. Valuation models and accounting numbers have only limited explanatory power and valuation role for companies with weak governance and less effective analyst performance. The findings are robust across various market value, return, unexpected return, and other accounting valuation models. The results are consistent with less informed foreign investor clienteles searching for signals of more effective analyst activity and better corporate governance mechanisms.

Hiring Stars and Their Colleagues: Exploration and Exploitation in Professional Service Firms

This paper examines exploration and exploitation in professional service firms by focusing on the individuals who carry out the exploration and exploitation activities. Specifically, we examine the performance of star security analysts who join new firms in exploration versus exploitation roles. We find that stars hired to explore (initiate new activities) experience a short- and long-term performance decline; by contrast, stars who join new firms to exploit (reinforce existing activities) suffer only a short-term drop in performance. Stars hired in exploration roles can preserve some of their performance by moving with a group of colleagues from the originating firm. Investors view the hiring of a star analyst as value-destroying for the hiring firm regardless of whether the firm is hiring to exploit or explore, but the negative reactions are economically more extreme for exploration hires. These findings indicate that, even at the individual level, probabilities of success in exploration activities are lower than in exploitation activities, thereby reinforcing the tendency toward exploitation.

Summary of United States Human Proteome Organisation (HUPO) Symposium Entitled “Standardized Clinical Proteomics Platforms”

Summary of United States Human Proteome Organisation (HUPO) Symposium Entitled “Standardized Clinical Proteomics Platforms”

A Survey on Analysts' Stock Recommendations: Are They Really Useful?

This survey summarizes some of the most recent academic literature about the impact and usefulness of stock recommendation. Most researchers examine the sell-side analyst recommendations since data pertaining to the buy-side and independent analyst recommendations is limited. This is the case because these analysts (buy side and independent) do not make their recommendations public hence limiting investor choices. Generally, the performance of sell side analysts' recommendations is inferior to that of buy side colleagues. However, momentum strategy documented in prior literature can enable investors to earn abnormal returns. This phenomenon contradicts the market efficiency hypothesis.

Do Local Analysts Know More? A Cross-Country Study of the Performance of Local Analysts and Foreign Analysts

Do Local Analysts Know More? A Cross-Country Study of the Performance of Local Analysts and Foreign Analysts

Discussion of “What Determines Financial Analysts’ Career Outcomes During Mergers?”

Wu and Zang [2009. What determines financial analysts’ career outcomes during mergers? Journal of Accounting & Economics, forthcoming] examine how mergers and acquisitions in the investment banking/brokerage industry affect financial analyst employment. They find evidence of abnormally high analyst turnover following mergers that appears to reflect the acquirer's elimination of duplicate research capabilities and top analysts at the newly merged firm being hired away by competitors. Finally, they show that the increased analyst turnover at merged firms is related to decreases in analyst coverage and analyst performance post-merger.

The Relative Importance of Forecast Accuracy Determinants Revisited: European Evidence

We analyze earnings forecasting errors made by financial analysts for 18 European countries over the 1995-2006 period. We use the Heston-Rouwenhorst approach to unravel country-, industry-, and firm-specific effects as a source of variation in financial analysts' earnings forecast errors. We first estimate each effect with a dummy variable regression, and then decompose the variance of forecast errors into different effects. We provide evidence that the differences among countries, industrial sectors, or analyst following offer a weak explanation for differences in forecast errors. Country effects however largely dominate industry and analyst following effects on European stock markets. By contrast, the type of earnings - profits or losses - and variations in earnings - increases or decreases - play a significant role in the performance of financial analysts.

Buy-Side vs. Sell-Side Analysts’ Earnings Forecasts

The study reported here is a comparison of the earnings-forecasting performance of analysts at a large buy-side firm with the performance of sell-side analysts in the 1997–2004 period. The tests show that the buy-side analysts made more optimistic and less accurate forecasts than their counterparts on the sell side. The performance differences appear to be partially explained by the buy-side firm’s greater retention of poorly performing analysts and by differences in the performance benchmarks used to evaluate buy-side and sell-side analysts.

What Drives Sell-Side Analyst Compensation at High-Status Banks?

Prior research has investigated sell-side analysts' incentives by examining the relation between analyst performance measures and either star analyst ratings or analyst turnover. Using propriety data from a large financial institution, we complement these studies by investigating factors that are associated with analysts' direct compensation. We find that total compensation is positively related to ranking among the top analysts in an industry by Institutional Investor, covering a stock that generates investment banking business for the firm, and covering stocks with large trading volume. We find no evidence that earnings forecast accuracy and stock recommendation performance are directly related to analysts' compensation. To assess the generality of our findings, we test the same relations using compensation data from a second large financial institution and find similar evidence.

Do local analysts know more? A cross-country study of the performance of local analysts and foreign analysts

This paper examines whether analysts resident in a country make more precise earnings forecasts for firms in that country than non-resident analysts. Using a sample of 32 countries, we find an economically and statistically significant local analyst advantage even after controlling for firm and analyst characteristics. The local advantage is high in countries where earnings are smoothed more, less information is disclosed by firms, and firm idiosyncratic information explains a smaller fraction of stock returns. It is negatively related to whether a firm has foreign assets and to market participation by foreign investors and by institutions, and positively related to holdings by insiders. The extent to which U.S. investors underweight a country's stocks is positively related to that country's local analyst advantage.

The Performance of Analysts with a CFA® Designation: The Role of Human-Capital and Signaling Theories

ABSTRACT: This study compares the performance of sell-side equity analysts with and without a Chartered Financial Analyst® (CFA) designation. Using a large sample of forecasts, our tests indicate that CFA charterholders issue forecasts that are timelier than those of non-charterholders. The results for accuracy are mixed. We establish that while charterholders perform at statistically significant higher levels than non-charterholders in some tests, the economic significance of these differences is questionable. For a subsample of analysts, we find evidence that charterholders improve along the dimension of timeliness after they receive their CFA charter. This result provides support for a human-capital explanation in which charterholders improve their productivity during the CFA program. Finally, we show that the market reaction for smaller firms is stronger for charterholders than non-charterholders after controlling for timeliness, boldness, accuracy, and optimism. This result provides evidence consistent with “credentialism,” a variant of signaling theory in which a professional's education level provides a signal about the professional's quality to his or her clients.