Market timing using strategists’ and analysts’ forecasts of S&P 500 earnings per share

Authors

  • Richard Chung Faculty of Commerce, Concordia University, 1455 De Maisonneuve Blvd. West, Montreal, Quebec, Canada, H3G 1M8
  • Lawrence Kryzanowski Ned Goodman Professor of Finance, Faculty of Commerce, Concordia University, 1455 De Maisonneuve Blvd. West, Montreal, Quebec, Canada, H3G 1M8

DOI:

https://doi.org/10.1016/S1057-0810(00)00061-5

Keywords:

Performance, Earnings forecasts, Market timing

Abstract

This paper examines the bias in and usefulness of top-down and bottom-up consensus forecasts of earnings per share for the S&P 500 Index provided by market strategists and analysts to I/B/E/S. These forecasts exhibit a significant optimism bias that decreases over the 12 months up to release of actual earnings per share. The bias is significantly more pronounced for the bottom-up forecasts of analysts. Unlike the findings for country timing, we demonstrate that a stock market timer using switching rules based on the consensus forecasts of S&P 500 earnings or the directional switch in the consensus or in the number of switchers cannot generate a free lunch. © 2000 Elsevier Science Inc. All rights reserved.

Downloads

Published

2000-06-30

How to Cite

Chung, R., & Kryzanowski, L. (2000). Market timing using strategists’ and analysts’ forecasts of S&P 500 earnings per share. Financial Services Review: The Journal of Individual Financial Management, 9(2), 125–144. https://doi.org/10.1016/S1057-0810(00)00061-5

Issue

Vol. 9 No. 2 (2000): Financial Services Review

Section

New Original Submission

License

Copyright (c) 2000 JAI Press Inc.

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

Author(s) retain copyright and grant the Journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution-NonCommercial 4.0 International License that allows to share the work with an acknowledgment of the work's authorship and initial publication in this Journal.

This license allows the author to remix, tweak, and build upon the original work non-commercially. The new work(s) must be non-commercial and acknowledge the original work.