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.

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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, 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.

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