Complicated Firms Moderate Analyst Forecast Errors When Sentiment is Higher
[摘要] This paper confirms that analyst forecasts are influenced by market sentiment and supports the prior findings that analyst earnings forecast errors increase when sentiment is higher. However, contrary to the prior literature that firm’s complexity or diversification make analysts difficult to forecast earnings and produce bigger forecast errors, this study finds that firm’s structural complexity moderates analyst forecast errors. Analyst earnings forecasts are more accurate and less optimistically biased for complicated firms and it is pronounced when sentiment is higher. That is, analyst earnings forecast inaccuracy and optimism when sentiment is higher are much reduced for complicated firms. This study also finds that earnings of complicated firms are more persistent. The earnings characteristics of complicated firms (i.e., lower earnings volatility, lower changes in earnings and higher earnings predictability) make analysts issue more accurate and less biased estimates. Because earnings of each segment are complementary to a given firm’s total earnings, these offset effects reduce earnings fluctuation in complicated firms. Even after controlling for the size effect, the findings are still supported.
[发布日期] [发布机构] University:서울대학교 대학원
[效力级别] complicated firms [学科分类]
[关键词] analyst earnings forecast errors;complicated firms;complexity;forecast accuracy;forecast bias;industry diversification;investor sentiment;658 [时效性]