Analyst Information Processing, Financial Regulation, and Academic Research

2009 ◽  
Vol 84 (4) ◽  
pp. 1073-1083 ◽  
Author(s):  
Mark T. Bradshaw
Keyword(s):  
Information Processing ◽  
Financial Regulation ◽  
Conflicts Of Interest ◽  
Research Question ◽  
Academic Research ◽  
Earnings Forecasts ◽  
Stock Recommendations ◽  
Market Participants ◽  
Regulatory Changes ◽  
Similarities And Differences

ABSTRACT: Changes in regulations governing capital markets always provide a rich setting for archival researchers to examine how such changes affect the behavior of market participants. Barniv et al. (2009; hereafter, BHMT) and Chen and Chen (2009; hereafter CC) examine the impacts of recently enacted regulations aimed at curbing perceived abused by sell-side analysts. There were no less than six significant regulations issued between 2000 and 2003 that affected the activities of analysts. BHMT and CC emphasize different regulations, but both predict that analysts' recommendation will be less biased as a result of the collective regulatory changes. The evidence in both studies is strong and convincing that the association between analysts' earnings forecasts and stock recommendations has changed, consistent with analysts' personal conflicts of interest having less impact on their analyses. However, the attribution of what regulation, if any, effected this change is less clear. Collectively, the similarities and differences in the studies provide a nice setting to understand how different authors approach the same research question.

NASD Rule 2711 and Changes in Analysts' Independence in Making Stock Recommendations

2009 ◽  
Vol 84 (4) ◽  
pp. 1041-1071 ◽  
Author(s):  
Chih-Ying Chen ◽  
Peter F. Chen
Keyword(s):  
Stock Prices ◽  
Conflicts Of Interest ◽  
Intrinsic Value ◽  
Earnings Forecasts ◽  
Investment Banking ◽  
Stock Recommendations ◽  
Regulatory Reforms

ABSTRACT: This study provides evidence of changes in how analysts generate stock recommendations after the SEC's approval of NASD Rule 2711 in May 2002, which introduced regulatory reforms to enhance the independence of analysts' research. We investigate the relations of analysts' stock recommendations with intrinsic value estimates (based on analysts' earnings forecasts relative to the stock prices, V/P) and with investment-banking-related conflicts of interest during the 1994–2005 period. We find a stronger relation between analysts' stock recommendations and V/P and a weaker relation between analysts' stock recommendations and conflicts of interest in the post-Rule period than prior to the implementation of the Rule. Moreover, the increases in the relation between stock recommendations and V/P after the implementation of the Rule are greater for the stocks recommended by analysts with greater potential conflicts of interest. Our findings suggest that the implementation of Rule 2711 has enhanced analysts' independence.

Characteristics and development of corporate and sovereign CDS

2014 ◽  
Vol 15 (5) ◽  
pp. 482-509 ◽  
Author(s):  
Christina E. Bannier ◽  
Thomas Heidorn ◽  
Heinz-Dieter Vogel
Keyword(s):  
Debt Crisis ◽  
Research Question ◽  
Subprime Crisis ◽  
Content Type ◽  
Main Research ◽  
Risk Hedging ◽  
Market Participants ◽  
Regulatory Changes ◽  
Broad Variety ◽  
European Debt Crisis

Purpose – This paper aims to provide an overview of the market for corporate and sovereign credit default swaps (CDS), with particular focus on Europe. It studies whether the subprime crisis of 2007/2008 and, particularly, the European debt crisis 2009/2010 led to a differential development on corporate and sovereign CDS markets and investigates the primary use (speculative risk-trading or risk-hedging) of the two markets in recent years. Design/methodology/approach – The authors use aggregate market data on the size of the respective markets and on the structure of market participants and their changes over time to assess the main research question. They enhance existing data from public sources such as the Bank for International Settlements and Depository Trust and Clearing Corporation with their own statistics on European sovereign CDS and combine their conclusions with observations regarding standardisation efforts and regulatory changes in the CDS market. Findings – The authors show that after the subprime crisis 2007/2008 and the European debt crisis 2009/2010, the corporate and sovereign CDS markets developed quite differently. They provide evidence that since mid-2010, market participants started to use the sovereign CDS market more strongly for speculative purposes than for risk-hedging. This shows both in the shift of risk-quality of sovereign CDS contracts and in the changing structure of market participants. The ongoing standardisation and regulation in the CDS market – leading to further increases in transparency and reductions in transaction costs – may be expected to trigger a similar change also for corporate CDS. Originality/value – Based on a broad variety of market infrastructure data, the authors show a diverging development of corporate and sovereign CDS markets in Europe in recent years. Particularly the sovereign CDS market appears to have shifted from a risk-hedging instrument to being used more strongly for speculative risk-trading. The authors combine their findings with recent regulatory action and market standardisation schemes and draw conclusions for the future development of CDS markets.

scholarly journals The Applicability of Self-Play Algorithms to Trading and Forecasting Financial Markets

2021 ◽  
Vol 4 ◽  
Author(s):  
Jan-Alexander Posth ◽  
Piotr Kotlarz ◽  
Branka Hadji Misheva ◽  
Joerg Osterrieder ◽  
Peter Schwendner
Keyword(s):  
Financial Markets ◽  
Research Question ◽  
Winning Strategy ◽  
Academic Research ◽  
Bond Markets ◽  
Central Research ◽  
Market Participants ◽  
Winning Strategies ◽  
Economic Forecasts ◽  
Optimal Behaviour

The central research question to answer in this study is whether the AI methodology of Self-Play can be applied to financial markets. In typical use-cases of Self-Play, two AI agents play against each other in a particular game, e.g., chess or Go. By repeatedly playing the game, they learn its rules as well as possible winning strategies. When considering financial markets, however, we usually have one player—the trader—that does not face one individual adversary but competes against a vast universe of other market participants. Furthermore, the optimal behaviour in financial markets is not described via a winning strategy, but via the objective of maximising profits while managing risks appropriately. Lastly, data issues cause additional challenges, since, in finance, they are quite often incomplete, noisy and difficult to obtain. We will show that academic research using Self-Play has mostly not focused on finance, and if it has, it was usually restricted to stock markets, not considering the large FX, commodities and bond markets. Despite those challenges, we see enormous potential of applying self-play concepts and algorithms to financial markets and economic forecasts.

Financial restatements and sell-side analysts' stock recommendations: evidence from Malaysia

2020 ◽  
Vol 16 (4) ◽  
pp. 501-524 ◽  
Author(s):  
Ameen Qasem ◽  
Norhani Aripin ◽  
Wan Nordin Wan-Hussin
Keyword(s):  
Emerging Market ◽  
Forecast Accuracy ◽  
Earnings Forecasts ◽  
Generalized Least Squares ◽  
Least Squares Regression ◽  
Content Type ◽  
Stock Recommendations ◽  
Market Participants ◽  
Analyst Behavior ◽  
Financial Restatements

PurposeThe purpose of this paper is to examine the influence of financial restatements on the sell-side analysts' stock recommendations.Design/methodology/approachThe sample of this study is based on a dataset from a panel of 246 Malaysian public listed companies for the period 2008 to 2013 (651 company-year observations). This study employs feasible generalized least squares regression.FindingsThis study finds a negative and significant relationship between restated companies and sell-side analysts' stock recommendations, which means that sell-side analysts issue less favorable stock recommendations for restated companies.Practical implicationsThe findings based on observations from an emerging economy complement the results of the US studies that analysts revise their earnings forecasts or recommendations downwards or drop coverage following financial restatements. The results of this study should be useful to capital market participants in understanding how analysts perceive and evaluate restated companies.Originality/valueThis paper expands the literature on financial restatements consequences in an emerging market which is largely unstudied. Prior research on analyst behavior towards restatements has focused on the consequences of restatements in terms of analyst following and forecast accuracy and dispersion. This study examines if and how the restatements affect the analysts' final output as reflected in the recommendation opinion, an area that has so far received little attention.

The Power-geometry of Food Business Research

2015 ◽  
Vol 15 (3) ◽  
pp. 47-52
Author(s):  
Peter Jackson
Keyword(s):  
Conflicts Of Interest ◽  
Academic Research ◽  
User Engagement ◽  
Publicly Funded ◽  
Business Research ◽  
Academic Researchers ◽  
Variable Power ◽  
Access To Data ◽  
Funding Environment ◽  
Power Geometry

In a funding environment where commercial collaboration and “user engagement” are increasingly encouraged, this paper explores the ethical, political, and methodological challenges of various forms of partnership between academic researchers and food businesses. Drawing on two recently completed projects, the paper assesses the variable “power-geometry” of such partnerships, including the process of negotiating access, securing informed consent, and conducting and disseminating the research. The paper distinguishes between publicly funded academic research, where independence is more easily maintained, and market research and consultancy, where conflicts of interest are more likely to arise. Commercial collaboration is academically valuable in providing access to data and insights that are not publicly available, but can be treacherous if researchers are unaware of the uneven power-geometry of such partnerships.

A Comparative Analysis of Two Qualitative Methods: Deciding Between Grounded Theory and Phenomenology for Your Research

2017 ◽  
Vol 28 (1) ◽  
pp. 23-40
Author(s):  
Masoodi Marjan
Keyword(s):  
Grounded Theory ◽  
Data Analysis ◽  
Comparative Analysis ◽  
Historical Development ◽  
Research Question ◽  
Qualitative Approaches ◽  
Development Goals ◽  
Applied Approach ◽  
Similarities And Differences ◽  
Research Students

Abstract The purpose of this article is to compare two qualitative approaches that can be used in different researches: phenomenology and grounded theory. This overview is done to (1) summarize similarities and differences between these two approaches, with attention to their historical development, goals, methods, audience, and products (2) familiarize the researchers with the origins and details of these approaches in the way that they can make better matches between their research question(s) and the goals and products of the study (3) discuss a brief outline of each methodology along with their origin, essence and procedural steps undertaken (4) illustrate how the procedures of data analysis (coding), theoretical memoing and sampling are applied to systematically generate a grounded theory (5) briefly examine the major challenges for utilizing two approaches in grounded theory, the Glaserian and Straussian. As a conclusion, this overview reveals that it is essential to ensure that the method matches the research question being asked, helps the researchers determine the suitability of their applied approach and provides a continues training for the novice researchers, especially PhD or research students who lack solid knowledge and background experience in multiple research methods.

Does Recent Academic Research Support Changes to Audit Reporting Standards?

2016 ◽  
Vol 30 (2) ◽  
pp. 255-275 ◽  
Author(s):  
Jean Bédard ◽  
Paul Coram ◽  
Reza Espahbodi ◽  
Theodore J. Mock
Keyword(s):  
Financial Reporting ◽  
Academic Research ◽  
Financial Statements ◽  
Future Research ◽  
Research Support ◽  
The Public ◽  
Market Participants ◽  
Information Gap ◽  
Public Company ◽  
Reporting Process

SYNOPSIS The Public Company Accounting Oversight Board (PCAOB), the International Auditing and Assurance Standards Board (IAASB), and the U.K. Financial Reporting Council (FRC) have proposed or approved standards that significantly change the independent auditor's report. These initiatives require the auditor to make additional disclosures intended to close the information gap; that is, the gap between the information users desire and the information available through the audited financial statements, other corporate disclosures, and the auditor's report. They are also intended to improve the relevancy of the auditor's report. We augment prior academic research by providing standard setters with an updated synthesis of relevant research. More importantly, we provide an assessment of whether the changes are likely to close the information gap, which is important to financial market participants and other stakeholders in the audit reporting process. Also, we identify areas where there seems to be a lack of sufficient research. These results are of interest to all stakeholders in the audit reporting process, as the changes to the auditor's report are fundamental. Additionally, our summaries of research on the auditor's report highlight where there is limited research or inconsistent results, which will help academics identify important opportunities for future research.

Concurrent Earnings Announcements and Analysts' Information Production

2019 ◽  
Vol 95 (1) ◽  
pp. 165-189 ◽  
Author(s):  
Matthew Driskill ◽  
Marcus P. Kirk ◽  
Jennifer Wu Tucker
Keyword(s):  
Earnings Announcements ◽  
Financial Analysts ◽  
Earnings Forecasts ◽  
Data Availability ◽  
Limited Attention ◽  
Conference Calls ◽  
Stock Recommendations ◽  
Rich Information ◽  
Sample Firm ◽  
Jel Classifications

ABSTRACT We examine whether financial analysts are subject to limited attention. We find that when analysts have another firm in their coverage portfolio announcing earnings on the same day as the sample firm (a “concurrent announcement”), they are less likely to issue timely earnings forecasts for the sample firm's subsequent quarter than analysts without a concurrent announcement. Among the analysts who issue timely earnings forecasts, the thoroughness of their work decreases as their number of concurrent announcements increases. In addition, analysts are more sluggish in providing stock recommendations and less likely to ask questions in earnings conference calls as their number of concurrent announcements increases. Moreover, when analysts face concurrent announcements, they tend to allocate their limited attention to firms that already have rich information environments, leaving behind firms in need of attention. Overall, our evidence suggests that even financial analysts, who serve as information specialists, are subject to limited attention. JEL Classifications: G10; G11; G17; G14. Data Availability: Data are publicly available from the sources identified in the paper.

Security Analyst and Stock Market Efficiency in Anticipating Tax-Motivated Income Shifting

2006 ◽  
Vol 81 (1) ◽  
pp. 227-250 ◽  
Author(s):  
Philip B. Shane ◽  
Toby Stock
Keyword(s):  
Earnings Forecasts ◽  
Income Shifting ◽  
Market Prices ◽  
Tax Rate ◽  
Income Effects ◽  
Market Participants ◽  
Security Analyst ◽  
Market Inefficiency ◽  
Reported Earnings ◽  
Statutory Tax Rate

In the context of the statutory tax rate reductions enacted in the Tax Reform Act of 1986, this paper investigates the degree to which capital market participants anticipate and correctly interpret temporary income effects of tax-motivated income shifting. We find evidence consistent with financial analysts' earnings forecasts failing to anticipate earnings management that shifts income from fourth quarters in higher tax rate years to immediately following first quarters of lower tax rate years. The evidence suggests that this failure is not the result of a decision to ignore the income shifting, but rather an inability to recognize temporary components of reported earnings. We also find evidence that market prices do not fully reflect the temporary income effects of tax-motivated income shifting, and that analyst inefficiency explains about half of the market inefficiency. We interpret these inefficiencies as potentially important costs of tax planning that could limit the ability of public firm managers to implement otherwise optimal tax strategies.

scholarly journals REVIEW OF DESIGN HEURISTICS AND DESIGN PRINCIPLES IN DESIGN FOR ADDITIVE MANUFACTURING

2021 ◽  
Vol 1 ◽  
pp. 2571-2580
Author(s):  
Filip Valjak ◽  
Angelica Lindwall
Keyword(s):  
Additive Manufacturing ◽  
Design Process ◽  
Research Question ◽  
Design Principles ◽  
Current Status ◽  
Design For Additive Manufacturing ◽  
Design Heuristics ◽  
Similarities And Differences ◽  
Definition Of ◽  
Support Methods

AbstractThe advent of additive manufacturing (AM) in recent years have had a significant impact on the design process. Because of new manufacturing technology, a new area of research emerged – Design for Additive Manufacturing (DfAM) with newly developed design support methods and tools. This paper looks into the current status of the field regarding the conceptual design of AM products, with the focus on how literature sources treat design heuristics and design principles in the context of DfAM. To answer the research question, a systematic literature review was conducted. The results are analysed, compared and discussed on three main points: the definition of the design heuristics and the design principles, level of support they provide, as well as where and how they are used inside the design process. The paper highlights the similarities and differences between design heuristics and design principles in the context of DfAM.

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