Financial Seminar Presentation

8/2/2019 Financial Seminar Presentation

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Financial Seminar Presentation

ThePredictive Content

of Aggregate AnalystRecommendations

by Younes Elmarzouki


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Article ReferencesThe Journal of Accounting Research Vol 47 June

2009

John Howe a professor of finance from theUniversity of Missouri

Xuemin Sterling a professor of finance from theUniversity of Missouri Columbia

Emre unlu a professor of corporate finance in theUniversity of Nebraska


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Article thesis

Determining if the changes in aggregate

analyst recommendations have predictive

content for future aggregate returns and

earnings


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The study makes three contributions:

A. Present evidence that analyst

recommendations contain market and

industry information

B. The positive correlation between

aggregate earnings and returns

C. Predictive content of aggregate

managerial actions


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Data used in this research

A sample of all analystsrecommendations of US stocks in the

I/B/E/S

Period of study from 1994 to 2006A final of 355,034 recommendation

analysts sample was filtered.

Break down of the sample to firstrecommendations and revised

recommendations within 12 months

period.


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The Measure of analyst

recommendations

Measurement of recommendations was

done in each month of the study at both

industry and market level.

Plotting the data gave the researchers

the average analyst recommendations


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Predicting aggregate return

Verification of the predictive market

return and industry return

a) Using regression analyst changes in

in aggregate analysts

recommendations predict market

return

b) Future industry returns were weakly

predicted by the aggregated analyst

recommendations.


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Prediction of aggregate earning

growthObtaining data from Compustat related to the

sample period

On the market level they were modest evidencethat changes in aggregate analysts

recommendations predict future aggregate

earnings growth

On the industry level a positive significant

relation between past industry aggregated

recommendations and future aggregated earnings


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Conclusion

Aggregate analyst recommendations

were proven based on this study to be

based on market or industry level

information.

Aggregate analyst recommendations are

informative at the aggregate level , they

predict content for future market and

industry returns and earnings.

Financial Seminar Presentation

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