Analysts' Prediction Bias And Future Earnings

Since the opening of China's securities market,analysts play an important role as the information intermediary between investors and listed companies.However,due to the improper incentive of analysts and the change of macro factors,there are generally optimistic biases in analysts' prediction in China.It has become a hot topic in recent years that the impact of analysts' prediction bias on stock returns.Previous authors combined with corporate financial indicators conducted a large number of studies in the perspective of analysts' improper incentives,but in the past few studies based on the perspective of macro factors to study the relevant issues of analysts' prediction bias and future earnings.Based on the data of Listed Companies in 2010-2019,this paper uses the enterprise characteristics method proposed by So(2013)and the macro variables of Granger causality screening to study analysts' prediction bias and future earnings.Compared with the traditional method,the enterprise feature method can avoid the problem of unobservable index error,and further study the influence of macro factor correction on analyst prediction correction and conduction process.The conclusion of this paper mainly includes the following three aspects: first,after the macro factor correction,the analysts' prediction bias is reduced,and investors have stronger dependence on analysts' reports.Secondly,the characteristic method has a significant effect on the correction of forecast target price,but does not affect the correction of analyst rating.In the limited small-scale,low book to market ratio and low excess profit sub samples,the correction of macro factors can promote the correction of analysts' forecast target price and rating.Finally,in the aspect of the returns of quintiles,as the market has a low dependence on the strategy,the overall return is far higher than the market average.Further considering the different enterprise characteristic variables,we find that the macro factor correction can improve the returns of small-scale,low book to market ratio and low absolute growth rate samples to a certain extent.The rest of the high score samples get higher returns,which is in line with the law of fundamental value investment.At the level of government supervision,considering the influence of macro-economy on the correction of analysts' forecast and the characteristic method after macro factor correction,we can formulate the regulation policy of stock market more accurately,reduce the risk caused by the excessive dependence of investors on analysts,and improve the efficiency of resource allocation in capital market.