The Quality of Analysts’ Earnings Forecasts During the Asian Crisis: Evidence from Singapore

Roger K. Loh, Mujtaba Mian

Journal of Business Finance & Accounting 30(5–6), 749–770 (2003).

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Roger K. Loh, Mujtaba Mian. The Quality of Analysts’ Earnings Forecasts During the Asian Crisis: Evidence from Singapore. Journal of Business Finance & Accounting 30(5–6), 749–770 (2003).

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IN ONE SENTENCE:

Analysts’ earnings forecasts show systematic inefficiencies during the Asian financial crisis that are not evident before the crisis.

Abstract:

We bring together three disparate strands of literature to develop a comprehensive empirical framework to examine the efficiency of security analysts' earnings forecasts in Singapore. We focus specifically on how the increased uncertainty and the negative market sentiment during the period of the Asian crisis affected the quality of earnings forecasts. While we find no evidence of inefficiencies in the pre-crisis period, our results suggest that after the onset of the crisis, analysts (1) issued forecasts that were systematically upward biased; (2) did not fully incorporate the (negative) earnings-related news; and (3) predicted earnings changes which proved too extreme.