Abstract
The aim of this paper is to investigate whether financial analysts’ earnings forecasts are
informative from the viewpoint of allocating investments across different stock markets.
Therefore we develop a country forecast indicator reflecting the analysts’ prospects for
specific stock markets. The country forecast indicator is defined as the number of companies
within one and the same stock market for which analysts revise their current year earnings
forecast upward divided by the total number of companies for which analysts revise their
current year earnings forecasts anyway.
Based on the available analysts’ earnings forecasts in the Institutional Brokers Estimate
System (I/E/B/S), we calculate a monthly country forecast indicator for the stock markets in
Germany, France, Italy, The Netherlands, United Kingdom, and Switzerland over the period
1990 to 1994. The time-series correlations between the monthly value of the indicator and the stock market returns around the date of calculating the indicator show that stock returns rather precede than follow revisions in earnings forecasts.
An investment strategy which is based on a monthly asset allocation to that stock market with the highest value of the country forecast indicator in the preceding month, gives a slight outperformance (around 3 percent excess return) compared to an equal allocation of funds to the stock markets involved.
Original language | English |
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Publisher | s.n. |
Number of pages | 16 |
Publication status | Published - 1999 |
Keywords
- Prognoses
- Beleggingen
- 85.33;