The Inefficient Use of Macroeconomic Information in Analysts' Earnings Forecasts in Emerging Markets
2008-03-03
Research Paper
pp 3-48.
This publication is part of collection
| Related Files |
|---|
View PDF Version
(ERS-2008-007-F&A.pdf, 0.4MB) |
This paper presents empirical evidence that security analysts do not efficiently use publicly available macroeconomic information in their earnings forecasts for emerging market stocks. Analysts completely ignore forecasts on political stability, while these provide valuable information for firm-level earnings growth. Analysts do incorporate output growth forecasts, but these actually bear no relevant information for firm-level earnings growth. Inflation forecasts are taken into account correctly. In addition, the information environment appears to be crucially important in emerging markets, as we find evidence that analysts handle macroeconomic information in a better way for more transparent firms.
Keywords
Classifications using
Journal of Economic Literature (JEL) Classification System
- G3 : Corporate Finance and Governance
- M : Business Administration and Business Economics; Marketing; Accounting
- G24 : Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies
Automatically Extracted Terms
- forecast
- earning
- analyst
- earnings forecasts
- information
- growth
- market
- earnings growth
- error
- stock
- country
- 0.01
- inflation
- 0.02
- earnings forecast errors
- year t
- output
- coefficient
- output growth
- result
