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Insider Trading And Analyst Forecast Revisions
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Book Synopsis Insider Trading and Analyst Forecast Revisions by : Wen Jin
Download or read book Insider Trading and Analyst Forecast Revisions written by Wen Jin and published by . This book was released on 2013 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine how insider trading affects market responses to subsequent analyst forecast revisions in a global setting. We find stronger market responses to analyst forecast revisions subsequent to the insider trading than to other revisions. This stronger response is mainly driven by analyst forecast revisions that are in the same direction as the previous insider trading signal. In further analyses, we find that the market responses are stronger to analyst forecast revisions that follow insider sales for the US data, but stronger to revisions that follow insider purchases for the international data. Overall, our study suggests that investors view analyst forecast revisions as having different information content conditional on the existence and direction of previous insider trading signals and that investors seem to respond to both the analyst signal and the previous insider signal at the time analysts revise their forecasts, although the prior insider trading signal have been publicly known.
Download or read book Insider Trading written by Paul U. Ali and published by CRC Press. This book was released on 2008-08-22 with total page 452 pages. Available in PDF, EPUB and Kindle. Book excerpt: Insider trading has long been considered an endemic feature of the world's financial markets. It is unsurprising that the recent growth in mergers and acquisitions worldwide has been accompanied by a growth in insider trading, on a scale not witnessed since the 1980's takeovers boom. Insider Trading: Global Developments and Analysis brings together the latest law and finance research on insider trading. It provides expert coverage on the established US, European, and Asia-Pacific securities markets, as well as the key emerging markets of Brazil and the greater China region. Providing high interest and up-to-date content, the book features several recent cases, including that of Martha Stewart.
Book Synopsis The Walk-Down to Beatable Analyst Forecasts by : Scott A. Richardson
Download or read book The Walk-Down to Beatable Analyst Forecasts written by Scott A. Richardson and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: It has been alleged that firms and analysts engage in an earnings guidance game where analysts first issue optimistic earnings forecasts and then 'walk down' their estimates to a level firms can beat at the official earnings announcement. We examine whether the walk-down to beatable targets is associated with managerial incentives to sell stock after earnings announcements on the firm's behalf (via new equity issuance) or from their personal accounts (through option exercises and stock sales). Consistent with these hypotheses, we find that the walk-down to beatable targets is most pronounced when firms or insiders are net sellers of stock after an earnings announcement. These findings provide new insights on the impact of capital market incentives on communications between managers and analysts.
Book Synopsis Analyst Forecasts, Earnings Management, and Insider Trading Patterns by : Garen Markarian
Download or read book Analyst Forecasts, Earnings Management, and Insider Trading Patterns written by Garen Markarian and published by VDM Publishing. This book was released on 2008 with total page 164 pages. Available in PDF, EPUB and Kindle. Book excerpt: For at least two decades, it was believed that making managers into owners could ameliorate many agency conflicts existing in capital markets settings. In fact, it now appears that managerial ownership of stock itself may encourage earnings manipulations. In this study, we show that CEO insider trading, earnings manipulations, and the ability to meet and exceed market benchmarks are all interrelated. Managers manipulate earnings to exceed analyst earnings forecasts. Additionally, managerial insider selling increases with performance relative to analyst forecasts, and is magnified by stock option holdings. Insider selling is more intense among managers who have used earnings manipulations to exceed forecasts. Additionally, managers who sell following the announcement of an earnings surprise are able to earn abnormal profits. Firms having both positive earnings surprises and insider selling exhibit lower subsequent accounting performance. This study is of interest to academics, practitioners who are interested in the finer mechanisms of markets, and advanced finance students, alike.
Book Synopsis Why Do Analysts Issue Forecast Revisions Inconsistent with Prior Stock Returns? Determinants and Consequences by : Xiaobo Dong
Download or read book Why Do Analysts Issue Forecast Revisions Inconsistent with Prior Stock Returns? Determinants and Consequences written by Xiaobo Dong and published by . This book was released on 2014 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the informativeness of analyst forecast revisions that are directionally inconsistent with prior stock price movements (sign-inconsistent revisions). Sign-inconsistent revisions represent approximately one-half of the forecast revisions from 1995 through 2010. Our tests indicate that sign-inconsistent revisions are less informative than are sign-consistent revisions. Sign-inconsistent revisions are less likely to be closer to actual earnings realizations and they generate smaller stock price reactions. We also find evidence that sign-inconsistent revisions are associated with analysts' economic incentives to generate trading volume and their behavioral limitations related to information uncertainty. These results suggest that sign-inconsistent revisions do not necessarily benefit investors.
Book Synopsis Unreported Insider Trades by : Millicent Chang
Download or read book Unreported Insider Trades written by Millicent Chang and published by . This book was released on 2014 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide evidence of unreported trading by corporate insiders in their own firm's shares and link this activity to future firm earnings and analyst forecast error. Unreported trading represent discrepancies between insider shareholdings from trades they report to the Exchange and their shareholdings as disclosed in the firm's annual report. Over the five year period from 2007 to 2011, the rate of unreported trading is 7.73%, being at its lowest in 2008 of 4.86% and peaking at 9.59% in 2011. Such activity is influenced by the firm's growth opportunities and individual factors such as equity related compensation and insider ownership. We separate unreported purchases from unreported sales due to the different motivations for buying and selling. Unreported purchases do not appear to lead earnings increases though they are able to predict forecast error. On the other hand, unreported sales predict future decreases in earnings for up to two years and are also related to forecast error. These findings suggest that insiders have foresight of decreases in earnings and conceal their sales to profit from such information, at the expense of other shareholders. They also trade opportunistically on analyst forecast error.
Book Synopsis The Magnitude and Timing of Analyst Forecast Response to Quarterly Earnings Announcements by : Lise Newman Graham
Download or read book The Magnitude and Timing of Analyst Forecast Response to Quarterly Earnings Announcements written by Lise Newman Graham and published by . This book was released on 1993 with total page 334 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Information content of analysts' composite forecast revisions by : Eugene A. Imhoff, Jr. and Gerald J. Lobo
Download or read book Information content of analysts' composite forecast revisions written by Eugene A. Imhoff, Jr. and Gerald J. Lobo and published by . This book was released on 1983 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Frequency of Financial Analysts' Forecast Revisions by : Pamela S. Stuerke
Download or read book The Frequency of Financial Analysts' Forecast Revisions written by Pamela S. Stuerke and published by . This book was released on 2014 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a theory of the frequency of financial analysts' forecast revisions and then tests the empirical predictions of the model. Financial analysts act as information intermediaries for firms and investors and therefore their forecast revision frequency helps explain the equilibrium of the supply of and demand for earnings predictions and assessments of firm value. The theory is based on the analyst's costs of information gathering and the profits obtained from selling the information to investors. Our analysis is conducted in two stages. In the first stage, a single-period, Kyle (1985) model is used to determine the profits generated by privately informed investors who trade on the analyst's forecast revision. The analyst is assumed to be compensated as a function of these profits. In the second stage, the analyst's optimal revision frequency to collect and sell private information is determined. We find that the analyst's optimal revision frequency is increasing in the variance of liquidity trading volume, the volatility of the underlying earnings process, and the earnings-response coefficient and decreasing in the total number of informed traders who invest in the firm and the cost of revision. These theoretical results are developed into empirical hypotheses that the frequency of analysts' forecast revisions between earnings announcements is positively associated with variability of the earnings process, average prior trading volume, and earnings response coefficients, and negatively associated with skewness of prior trading volume, after controlling for firm size and prior average daily stock price changes. These hypotheses are tested cross-sectionally and we find significant support each of the hypothesized relations.
Book Synopsis The Walkdown to Beatable Analyst Forecasts by : Scott A. Richardson
Download or read book The Walkdown to Beatable Analyst Forecasts written by Scott A. Richardson and published by . This book was released on 2011 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Security regulators and the business press have alleged that firms play an 'earnings-guidance game' where analysts make optimistic forecasts at the start of the year and then 'walk down' their estimates to a level the firm can beat by the end of the year. In a comprehensive sample of I/B/E/S individual analysts' forecasts of annual earnings from 1983-1998, we find strong support for the claim in the post-1992 period. We examine whether the 'walk down' to beatable targets is associated with managers' incentives to sell stock after earnings announcements on the firm's behalf (via new equity issuance) or from their personal accounts (insider trades). Consistent with these hypotheses, we find that the 'walk down' to beatable targets is most pronounced in firms that are either net issuers of equity or in firms where managers are net sellers of stock after an earnings announcement. These findings provide new insights on how capital market incentives affect communications between managers and analysts.
Book Synopsis Determinants of Earnings Forecast Error, Earnings Forecast Revision and Earnings Forecast Accuracy by : Sebastian Gell
Download or read book Determinants of Earnings Forecast Error, Earnings Forecast Revision and Earnings Forecast Accuracy written by Sebastian Gell and published by Springer Science & Business Media. This book was released on 2012-03-26 with total page 144 pages. Available in PDF, EPUB and Kindle. Book excerpt: Earnings forecasts are ubiquitous in today’s financial markets. They are essential indicators of future firm performance and a starting point for firm valuation. Extremely inaccurate and overoptimistic forecasts during the most recent financial crisis have raised serious doubts regarding the reliability of such forecasts. This thesis therefore investigates new determinants of forecast errors and accuracy. In addition, new determinants of forecast revisions are examined. More specifically, the thesis answers the following questions: 1) How do analyst incentives lead to forecast errors? 2) How do changes in analyst incentives lead to forecast revisions?, and 3) What factors drive differences in forecast accuracy?
Book Synopsis Sophisticated and Unsophisticated Investors' Reactions to Analysts' Forecast Revisions Conditional on Factors that are Associated with Forecast Accuracy by : Sarah E. Bonner
Download or read book Sophisticated and Unsophisticated Investors' Reactions to Analysts' Forecast Revisions Conditional on Factors that are Associated with Forecast Accuracy written by Sarah E. Bonner and published by . This book was released on 2001 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study we examine differences between sophisticated and unsophisticated investors' incorporation of information about the accuracy of sell-side analysts' revisions of quarterly earnings forecasts. Our results indicate that sophisticated investors' weights on information cues associated with accuracy more closely match the weights derived from environmental models of forecast accuracy. Further, our findings suggest that sophisticated investors' strategies better reflect the costs and benefits of using accuracy cues that provide statistically significant, but economically small, explanatory power for forecast accuracy. Our evidence is consistent with sophisticated investors having greater knowledge about the factors that are related to forecast accuracy and exhibiting more adaptive cue-weighting strategies.
Book Synopsis Analyst Forecast Revisions and Market Price Formation by : Cristi A. Gleason
Download or read book Analyst Forecast Revisions and Market Price Formation written by Cristi A. Gleason and published by . This book was released on 2002 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: We document several factors that help explain cross-sectional variations in the delayed price response to individual analyst forecast revisions. First, the market does not make a sufficient distinction between those analysts providing new information and others simply quot;herdingquot; toward the consensus. Second, the market responds more completely to quot;celebrityquot; analysts, and under-weights revisions by obscure, but highly accurate, analysts. Third, controlling for firm size, the market price adjustment is more complete for firms with wider analyst coverage. Moreover, a significant portion of the delayed price response is corrected around future earnings news events, particularly forecast revisions by other analysts. Taken together, these findings show that qualitative aspects of an earnings signal can affect the speed and efficacy of the price formation process.
Book Synopsis Analyst Forecasts, Earnings Management, and Insider Trading Patterns by : Garen Markarian
Download or read book Analyst Forecasts, Earnings Management, and Insider Trading Patterns written by Garen Markarian and published by . This book was released on 2005 with total page 155 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Analyst Forecast Revisions and Market Price Discovery by : Cristi A. Gleason
Download or read book Analyst Forecast Revisions and Market Price Discovery written by Cristi A. Gleason and published by . This book was released on 2003 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We document several factors that help explain cross-sectional variations in the post-revision price drift associated with analyst forecast revisions. First, the market does not make a sufficient distinction between revisions that provide new information ("high-innovation" revisions) and revisions that merely move toward the consensus ("low-innovation" revisions). Second, the price adjustment process is faster and more complete for "celebrity" analysts (Institutional Investor All-Stars) than for more obscure yet highly accurate analysts (Wall Street Journal Earnings-Estimators). Third, controlling for other factors, the price adjustment process is faster and more complete for firms with greater analyst coverage. Finally, a substantial portion of the delayed price adjustment occurs around subsequent earnings-announcement and forecast-revision dates. Collectively, these findings show that more subtle aspects of an earnings revision signal can hinder the efficacy of market price discovery, particularly in firms with relatively low analyst coverage, and that subsequent earnings-related news events serve as catalysts in the price discovery process.
Book Synopsis The Speed With Which Analysts Incorporate Firm-Specific and Industry Information in Their Forecasts by : Sami Keskek
Download or read book The Speed With Which Analysts Incorporate Firm-Specific and Industry Information in Their Forecasts written by Sami Keskek and published by . This book was released on 2019 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: We separate analyst forecast revisions into components representing industry-wide and firm-specific news. Using the relation between analyst forecast revisions and upcoming news to estimate how completely analysts incorporate their private information in their forecasts, we show that analysts incorporate a smaller proportion of industry-wide news than firm-specific news in their forecasts, particularly when the underlying news is bad. Post-forecast-revision drift is strongly associated with the private industry-wide information that analysts withhold from their forecast revisions. Furthermore, analysts' information withholding varies predictably with their incentives. Unlike prior research that attributes post-forecast revision drift to delayed market response to news in forecast revisions, our findings suggest that the drift arises because investors are unable to anticipate the news that analysts withhold from their forecast revisions. Our study sheds light on analysts' role in conveying firm-specific and industry-wide news to investors and on the implications for post-forecast-revision drift.
Book Synopsis The Predictability of Analyst Forecast Revisions by : Michael J. Jung
Download or read book The Predictability of Analyst Forecast Revisions written by Michael J. Jung and published by . This book was released on 2019 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: The most prevalent forecasts of firms' long-term earnings issued by analysts are two-year-ahead earnings per share (EPS) estimates. When introduced by analysts, two-year-ahead EPS estimates set market expectations for firms' future earnings. Subsequent revisions to these estimates are highly correlated with contemporaneous changes in stock prices. We examine whether such revisions are sufficiently predictable to enable investors to earn abnormal returns on hedged portfolios. We find that analyst forecast revisions are predictable and document an implementable strategy for investors. Consistent with investors' fixation on unscaled EPS, the strategy earns positive abnormal returns using unscaled EPS revisions but not when revisions are scaled by the level of the EPS estimate or the stock price. Abnormal returns are found for firms with low analyst coverage, consistent with a greater initial mispricing from analyst optimism for firms with poorer information environments.
