What factors drive analyst forecasts in South Africa?

Abstract

This research examines through the use of survey data which key factors around a companies‟ industry positioning, strategic decisions and internal qualitative capabilities, are considered by financial analysts when preparing their financial forecasts. The research covered buy-side and sell-side analysts in South Africa. The results were however found to be non-conclusive and did not align to previous research on this matter. Comparisons between analysts covering the same company were performed with consistencies found on average across all variables. It is interesting to note that when a detailed analysis and comparison was performed by individual variable for analysts covering the same company, different views on some of the variables were identified between buy-side and sell-side analysts, therefore supporting the research obtained during the literature review. It was found based on the tests performed that the factors which have an impact on forecasted financials relate to superior product/service strategy, innovation and ability to execute strategy. These variables were however noted not to be consistent across all the financial forecast factors and are contradictory to the research highlighted in the literature review as well as the outcomes of the original study, ie. There are additional factors which are considered important. Further research is recommended on analyst behaviour in South Africa.