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.

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Erasmus Research Institute of Management
hdl.handle.net/1765/11556
ERIM Report Series Research in Management
ERIM report series research in management Erasmus Research Institute of Management
Erasmus Research Institute of Management

de Zwart, G.J, & van Dijk, D.J.C. (2008). The Inefficient Use of Macroeconomic Information in Analysts' Earnings Forecasts in Emerging Markets (No. ERS-2008-007-F&A). ERIM report series research in management Erasmus Research Institute of Management (pp. 3–48). Erasmus Research Institute of Management. Retrieved from http://hdl.handle.net/1765/11556