Research On Investment Strategy Based On Earning Forecast Accuracy And Recommendations

Securities analysts are important information mediators in the securities market.They have the advantage of gathering information and the ability to interpret information.They play an important role in interpreting and disseminating information of companies.Analysts pass on company information and their own subjective judgments by writing research reports.The two most important indicators in the research report are the earning forecast and the recommendation.China has obtained different conclusions when it comes to whether the recommendation has investment value.Does the recommendation have significant investment value? We combine the accuracy of analyst earning forecasts to study the investment value of analysts' recommendation.Combining the earning forecast with the investment value of the recommended can reveal the information more depth.At present,the majority of domestic research on earning forecasting accuracy alone or on the investment value of the recommendation alone.Based on the mature research system in foreign countries,we also draw on the latest research results to examine the internal links between the two.We have combined the earning forecasting accuracy to build a portfolio on the basis of the previous recommendation and built a portfolio for investors.Study provides important references and also contributes to the study of financial theory.This paper takes the sample of the research report issued by China's securities analysts in 2009-2016,combining the analyst's forecasting accuracy of the specific stocks with the stock's recommendation to construct a portfolio,and examining the earning forecast accuracy impact the value of recommendation.If an analyst has a high forecast accuracy for a certain stock,does the analyst‘ recommendation for the stock has a higher value? The article makes a study on this.The basic method: according to the analyst's forecast accuracy,analysts are grouped into groups,and the stocks are divided into buy or sell portfolios according to the analyst's consensus recommendation on the stocks.We focus on the consensus recommendation of stocks by analysts with high earning forecast accuracy.This paper focuses on constructing arbitrage portfolios by buying high accuracy forecasting analysts' buying rating stocks and selling high accuracy forecasting accuracy analysts' selling rating stocks,holding the portfolio for a year.This article further expands research from the perspective of rating changes and actual earning fluctuations.In this paper,we find that the accuracy of earning forecasting has a significant impact on the value of the recommendation.The analyst's consensus recommendation on the high forecast accuracy is significantly higher than the value of the recommendation of the low forecast accuracy analyst;Buying the high forecasting accuracy analysts‘ buying rating stocks,selling high earning forecast accuracy analysts‘ selling rating stocks to construct portfolios,holding portfolios has a significant arbitrage return about 0.6% a month.The arbitrage are effective;In the arbitrage constructed in the same way with the change recommendation data,the arbitrage can still obtain significant excess returns.The empirical evidence shows that the market is more concerned with the recommendation of analysts who have high earning forecast accuracy,and ignore the recommendation of analysts who have low earning forecast accuracy.When assessing a stock,we should focus on the consensus recommendation of analysts with high earning forecast accuracy.When conducting further tests of robustness,we found that this rule still applies.The practical significance and academic value of this article are reflected in the following points: First,if the higher the forecast accuracy of earning,the higher the value of the recommendation of the analysts,then this study can provide investors with a better strategy for screening stocks to provide a better strategy.Second,the research can reveal whether analysts need to invest more resources to get a more accurate earning forecast.A more accurate earning forecast will provide analysts with an advantage in the stock's recommended.Third,it can provide additional information to determine the ability of analysts to recommend stock.Fourth,it is generally believed that excellent analysts will have strong capabilities in stock screening,earning forecasting and reporting,suggesting a potential link between these.