The Accuracy of Analysts` Earnings Forecasts in Emerging Markets: the role of market condition matter

Date
2023
Journal Title
Journal ISSN
Volume Title
Publisher
University of the Witswatersrand, Johannesburg
Abstract
Financial analysts are responsible for gathering and evaluating company information. One of the outputs of that process are analyst earnings forecasts. Analyst forecasts are important to investors, to company stakeholders such as regulators, and contribute towards improving the efficiency of financial markets. There is limited work that has been done in recent times to investigate the accuracy of analysts’ earnings forecasts in emerging and developed markets. This study investigates the accuracy of earnings forecasts between emerging and developed markets and goes further to establish some of the factors that influence earnings forecasts in these two markets. This study looked at 10 countries, with Brazil, South Africa, Russia, India, and China representing the emerging market and the United States of America (USA), United Kingdom (UK), Germany, Japan, and Singapore representing the developed markets. From these countries, 50 equities of the top-performing companies were analysed over a period between 2008 and 2012. Quantitative analysis showed that earnings forecasts in emerging markets are not akin to those of developed markets. Multiple regression analysis finds that earnings forecasts accuracy is more in emerging markets when compared with developed markets, contradicting available literature. Factors influencing forecast accuracy are not significantly different across the regions. Debt-to-asset ratio (DA) is the only factor with the same influence in both regions and price-to-book (PB) has the most varying influence within regions.
Description
This research submitted for the Master of Management in Finance and Investments degree at the University of the Witwatersrand.
Keywords
Analysts` Earnings Forecasts, Emerging Markets, Market condition matter, Analyst forecasts, UCTD
Citation