Asset Securitization, Securitization Recourse, and Information Uncertainty

2011 ◽  
Vol 86 (2) ◽  
pp. 541-568 ◽  
Author(s):  
Mei Cheng ◽  
Dan S. Dhaliwal ◽  
Monica Neamtiu
Keyword(s):  
Analyst Forecast ◽  
Financial Assets ◽  
Asset Securitization ◽  
Information Uncertainty ◽  
Forecast Dispersion ◽  
Holding Companies ◽  
Risk Transfer ◽  
Market Participants ◽  
Asset Backed Securities ◽  
Analyst Forecast Dispersion

ABSTRACT: In this study, we examine some of the consequences of asset securitization. Specifically, using a sample of bank holding companies, we investigate whether the difficulty in assessing the true extent of risk transfer, between securitizing banks and investors in asset-backed securities, affects bank information uncertainty. We find that when market participants have a greater difficulty in estimating risk transfer, banks face greater information uncertainty (i.e., larger bid-ask spreads and analyst forecast dispersion). In addition, we find that this effect is mitigated for banks that operate in a higher quality information environment. We also find that banks that securitize financial assets have higher spreads and analyst forecast dispersion as compared to non-securitizing banks.

Does analyst forecast dispersion represent investors’ perceived uncertainty toward earnings?

2020 ◽  
Vol 19 (3) ◽  
pp. 289-312
Author(s):  
Jundong (Jeff) Wang
Keyword(s):  
Negative Correlation ◽  
Private Information ◽  
Implied Volatility ◽  
Earnings Announcements ◽  
Analyst Forecast ◽  
Forecast Dispersion ◽  
Earnings Announcement ◽  
Content Type ◽  
Analyst Forecast Dispersion ◽  
Forward Looking

Purpose This paper aims to investigate the association between analyst forecast dispersion and investors’ perceived uncertainty toward earnings. Design/methodology/approach A new measure for investors’ expectations of earnings announcement uncertainty is constructed, using changes in implied volatility of option contracts prior to earnings announcements. Unlike other proxies of uncertainty, this measure isolates the incremental uncertainty regarding the upcoming earnings announcement and is a forward-looking measure. Findings Using this new proxy, this paper finds a significant negative correlation between analyst forecast dispersion and investors’ uncertainty regarding the upcoming earnings announcements. Further tests show that this negative correlation is driven by analysts’ private information acquisition rather than analysts; uncertainty toward upcoming earnings announcements. Additional cross-sectional tests show that this negative relationship is more pronounced in the subsample with lower earnings quality. Social implications This paper helps to further the understanding of the information content of analyst forecast dispersion, particularly the ways in which they gather and produce private information and their incentives for so doing. Originality/value This paper introduces a new market-based and forward-looking proxy of earnings announcement uncertainty that should be useful in future research. This paper also provides original empirical evidence that analysts gather and produce an additional private information to the market when facing noisy signals and that their information reduces investors’ uncertainty toward upcoming earnings announcements.

Confucius confusion: analyst forecast dispersion and business cycles

2018 ◽  
Vol 10 (2) ◽  
pp. 130-145
Author(s):  
Raymond Cox ◽  
Ajit Dayanandan ◽  
Han Donker ◽  
John R. Nofsinger
Keyword(s):  
Business Cycles ◽  
Business Cycle ◽  
Stock Returns ◽  
Turning Points ◽  
Analyst Forecast ◽  
Economic Data ◽  
Forecast Dispersion ◽  
Content Type ◽  
The Us ◽  
Analyst Forecast Dispersion

PurposeFinancial analysts have been found to be overconfident. The purpose of this paper is to study the ramifications of that overconfidence on the dispersion of earnings estimates as a predictor of the US business cycle.Design/methodology/approachWhether aggregate analyst forecast dispersion contains information about turning points in business cycles, especially downturns, is examined by utilizing the analyst earnings forecast dispersion metric. The primary analysis derives from logit regression and Markov switching models. The analysis controls for sentiment (consumer confidence), output (industrial production), and financial indicators (stock returns and turnover). Analyst data come from Institutional Brokers Estimate System, while the economic data are available at the Federal Reserve Bank of St Louis Economic Data site.FindingsA rise in the dispersion of analyst forecasts is a significant predictor of turning points in the US business cycle. Financial analyst uncertainty of earnings estimate contains crucial information about the risks of US business cycle turning points. The results are consistent with some analysts becoming overconfident during the expansion period and misjudging the precision of their information, thus over or under weighting various sources of information. This causes the disagreement among analysts measured as dispersion.Originality/valueThis is the first study to show that analyst forecast dispersion contributions valuable information to predictions of economic downturns. In addition, that dispersion can be attributed to analyst overconfidence.

scholarly journals Analyst Forecast Dispersion and Market Return Predictability: Does Conditional Equity Premium Play a Role?

2020 ◽  
Vol 13 (5) ◽  
pp. 98
Author(s):  
Shuang Liu ◽  
Juan Yao ◽  
Stephen Satchell
Keyword(s):  
Investor Sentiment ◽  
Equity Premium ◽  
Analyst Forecast ◽  
Future Market ◽  
Dispersion Effect ◽  
Forecast Dispersion ◽  
Put Options ◽  
Short Sale Constraints ◽  
Short Sale ◽  
Analyst Forecast Dispersion

Prior studies found that analyst forecast dispersion predicts future market returns. Some prior studies attribute this predictability to the short-sale constraints in the market according to the overpricing theory. Using the U.S. data from 1981 to 2014, we find that the return predictive power of aggregate dispersion only exists prior to 2005. The investor sentiment index, as a proxy of short-sale constraints used by many studies, can only explain the dispersion effect prior to 2005. The investor sentiment index and other proxies such as institutional ownership and put options cannot explain the significant weakening of the dispersion effect after the global financial crisis. We argue that the dispersion-return relation is partly driven by the correlation between dispersion and conditional equity premium. Our evidence suggests that the short-sale constrained stocks do not experience a higher dispersion effect, which is contrary to what the overpricing theory predicts.

Empirical Evidence on the Impact of Book-Tax Differences on Divergence of Opinion among Investors

2011 ◽  
Vol 33 (1) ◽  
pp. 51-78 ◽  
Author(s):  
Joseph Comprix ◽  
Roger C. Graham ◽  
Jared A. Moore
Keyword(s):  
Financial Statements ◽  
Financial Accounting ◽  
Analyst Forecast ◽  
Market Uncertainty ◽  
Financial Reports ◽  
Forecast Dispersion ◽  
Market Participants ◽  
Divergence Of Opinion ◽  
Return Variance ◽  
The Impact

ABSTRACT: It is well known that the objectives of financial accounting and tax accounting sometimes conflict, resulting in book-tax differences (BTDs). In this study we test for associations between measures of BTDs and measures of market participants’ uncertainty regarding the information conveyed in financial reports. The measures of market participant uncertainty are: (1) share turnover, (2) analyst forecast dispersion, and (3) stock return variance. We find positive associations between levels and variability of total BTDs and the three measures. After disaggregating BTDs into their permanent and temporary components, we find that both are positively associated with market uncertainty, although the permanent component of BTDs is generally more strongly and consistently associated with measures of uncertainty than is the temporary component. We interpret these results, in part, as indicative of the possible effect of uncertainty contained in BTDs, especially permanent BTDs, on the precision of the information conveyed in the financial statements.

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