Melbourne Accounting Research Seminar - Peeyush Taori

Peeyush Taori from Hong Kong University will present a MARS seminar.

Topic: How Good are Analysts’ Scenario-Based Valuation Forecasts? Large Sample Evidence

Abstract: Using a sample of analyst reports for S&P 500 firms from 2003 to 2018, we examine analysts’ ability to assess valuation uncertainty and fundamental risk of firms using scenario-based valuation forecasts (bull-bear values) provided by analysts. Except during financial crisis, we do not find generalizable evidence that bull/bear forecasts can predict valuation errors. Market tests suggest that investors react to the scenario valuations. Consistent with notion of state-contingent valuations making investors aware of underlying firm uncertainty, we find that bull/bear forecasts are associated with lower returns and volume, higher volatility, and higher stock price crash risk. Results suggest that analysts' superior ability to forecast first moment values might not translate to their second-moment forecasts.

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