The hot-growth companies

How well do analysts predict their performance?

Susana Yu, Richard Lord, Gwendolyn Webb

Research output: Contribution to journalArticleResearchpeer-review

1 Citation (Scopus)

Abstract

We assess several aspects of analysts' forecasting performance for stocks included in Business Week's annual list of 100 "hot-growth" companies. We find that analysts underestimate earnings before stocks are included in the list, and they tend to overestimate them afterward. However, analysts revise their earnings estimates downward after stocks are included in the list, and the largest downward revisions are followed by significant negative stock returns. We conclude that analysts correctly assess the diminished prospects of stocks designated as "hot-growth" companies and that their forecast revisions have significant predictive power and value.

Original languageEnglish
Pages (from-to)195-219
Number of pages25
JournalJournal of Economics and Business
Volume62
Issue number3
DOIs
StatePublished - 1 May 2010

Fingerprint

Company growth
Analysts
Predictive power
Stock returns
Forecast revisions
Forecasting performance

Keywords

  • Earning surprise
  • Earnings forecast
  • Estimate revisions

Cite this

@article{8aafdb8411af45c78d17102c84e63781,
title = "The hot-growth companies: How well do analysts predict their performance?",
abstract = "We assess several aspects of analysts' forecasting performance for stocks included in Business Week's annual list of 100 {"}hot-growth{"} companies. We find that analysts underestimate earnings before stocks are included in the list, and they tend to overestimate them afterward. However, analysts revise their earnings estimates downward after stocks are included in the list, and the largest downward revisions are followed by significant negative stock returns. We conclude that analysts correctly assess the diminished prospects of stocks designated as {"}hot-growth{"} companies and that their forecast revisions have significant predictive power and value.",
keywords = "Earning surprise, Earnings forecast, Estimate revisions",
author = "Susana Yu and Richard Lord and Gwendolyn Webb",
year = "2010",
month = "5",
day = "1",
doi = "10.1016/j.jeconbus.2010.01.001",
language = "English",
volume = "62",
pages = "195--219",
journal = "Journal of Economics and Business",
issn = "0148-6195",
publisher = "Elsevier Inc.",
number = "3",

}

The hot-growth companies : How well do analysts predict their performance? / Yu, Susana; Lord, Richard; Webb, Gwendolyn.

In: Journal of Economics and Business, Vol. 62, No. 3, 01.05.2010, p. 195-219.

Research output: Contribution to journalArticleResearchpeer-review

TY - JOUR

T1 - The hot-growth companies

T2 - How well do analysts predict their performance?

AU - Yu, Susana

AU - Lord, Richard

AU - Webb, Gwendolyn

PY - 2010/5/1

Y1 - 2010/5/1

N2 - We assess several aspects of analysts' forecasting performance for stocks included in Business Week's annual list of 100 "hot-growth" companies. We find that analysts underestimate earnings before stocks are included in the list, and they tend to overestimate them afterward. However, analysts revise their earnings estimates downward after stocks are included in the list, and the largest downward revisions are followed by significant negative stock returns. We conclude that analysts correctly assess the diminished prospects of stocks designated as "hot-growth" companies and that their forecast revisions have significant predictive power and value.

AB - We assess several aspects of analysts' forecasting performance for stocks included in Business Week's annual list of 100 "hot-growth" companies. We find that analysts underestimate earnings before stocks are included in the list, and they tend to overestimate them afterward. However, analysts revise their earnings estimates downward after stocks are included in the list, and the largest downward revisions are followed by significant negative stock returns. We conclude that analysts correctly assess the diminished prospects of stocks designated as "hot-growth" companies and that their forecast revisions have significant predictive power and value.

KW - Earning surprise

KW - Earnings forecast

KW - Estimate revisions

UR - http://www.scopus.com/inward/record.url?scp=77949873064&partnerID=8YFLogxK

U2 - 10.1016/j.jeconbus.2010.01.001

DO - 10.1016/j.jeconbus.2010.01.001

M3 - Article

VL - 62

SP - 195

EP - 219

JO - Journal of Economics and Business

JF - Journal of Economics and Business

SN - 0148-6195

IS - 3

ER -