Another look at factors explaining quality of financial analysts’ forecasts: Evidence from the Asian emerging markets

We analyse the relative importance of country-, industry-, and firm-specific factors in explaining the source of variation in the forecast errors made by financial analysts with respect to Pacific Basin emerging markets. Following [Heston, S. L., Rouwenhorst, K.G., 1994. Does industrial structure ex...

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Bibliographic Details
Published in:Journal of multinational financial management 2005-10, Vol.15 (4), p.414-434
Main Authors: Coën, Alain, Desfleurs, Aurélie, L’Her, Jean-François, Suret, Jean-Marc
Format: Article
Language:English
Subjects:
Analysts’ forecasts
Asia
Asian emerging markets
Country factors
Economic forecasts
Emerging markets
Error
Financial analysis
Financial systems
Industrial organization
Industrial structure
International capital market
International finance
Risk
Statistical analysis
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Summary:We analyse the relative importance of country-, industry-, and firm-specific factors in explaining the source of variation in the forecast errors made by financial analysts with respect to Pacific Basin emerging markets. Following [Heston, S. L., Rouwenhorst, K.G., 1994. Does industrial structure explain the benefits of international diversification? Journal of Financial Economics 36, 3–27], we first estimate each factor, and then decompose the variance of forecast errors into different effects. We document that the differences among countries, industrial sectors, or analyst following offer a weak explanation for the differences in forecast errors and forecast biases on eight Asian emerging markets examined over the 1990–2001 period. The type of earnings – profits or losses – and the variation of earnings – growth or fall – appear to be the two main explanation sources for the performance of financial analysts.
ISSN:1042-444X
1873-1309
DOI:10.1016/j.mulfin.2005.04.005