Analysts’ Forecasts and Stock Prices in Nigeria

Iranian Journal of Accounting, Auditing and Finance

مقاله 1، دوره 5، شماره 2 - شماره پیاپی 15، مرداد 2021، صفحه 1-10   

نوع مقاله: Original Article

شناسه دیجیتال (DOI): 10.22067/ijaaf.2021.40230

نویسنده

Onipe Adabenege Yahaya^*

DEPARTMENT OF ACCOUNTING, FACULTY OF MANAGEMENT SCIENCES, NIGERIAN DEFENCE ACADEMY, PMB 2109, KADUNA, NIGERIA

چکیده

Analyst forecast information is available to the public in less developed countries at a little cost. The role of analysts in forecasting stock returns cannot be over-emphasized. Yet, little scholarly works have been done in Nigeria. The purpose of this paper is to interrogate analysts’ forecasts' effect on share prices in Nigeria. The research approach is correlational. We collected and analyzed data for several years from the annual reports and accounts of 138 corporations over 10 years (2010-2019). The results indicate that experts 1, 3, and 4 have a significant and positive impact on stock return. The information from expert 2 had failed to show any signal of significance. Based on the majority of these results, the paper recommends that financial analysts consider the information when considering the price of stocks in Nigeria. The conclusion is that the study results have implications for stakeholders (management, public, employees, suppliers, investors, creditors, regulators, governments, customers, users, partners, charity organizations, special interest-holders; competitors, community groups, trade groups, and the media/press) and based on the findings, it is suggested among others that stakeholders who need the prices of stocks should depend on analyst forecast.
 

کلیدواژه‌ها

Analyst؛ Financial؛ Forecasts؛ Prices؛ Shares

مراجع

1. Adebiyi, A.A., Ayo, C.K., Adebiyi, M.O. and Otokiti, S.O. (2012). Stock price prediction using neural network with hybridized market indicators. Journal of Emerging Trends in Computing and Information Sciences, 3(1), pp. 1-9.
2. Ang, S.J. and Ciccone, J.J. (2021). Analyst Forecasts and Stock Returns. SSRN Electronic, https://doi.org/10.2139/ssrn.271713
3. Bag, D. (2019). Information content of stocks in call auction of shorter duration in emerging market. Copernican Journal of Finance and Accounting, 8 (4), pp. 113-132. https://doi.org/12775/CJFA.2019.020
4. Bandyopadyyny, S.P., Brown, L.D. and Richardson, G.D. (2021). Analysts' use of earnings forecasts in predicting stock returns: Forecast horizon effects. International Journal of Forecasting, 11(3), pp. 429-445. https://doi.org/10.1016/0169-2070(95)00593-0
5. Bradshaw, M.T. (2000). How do analysts use their earnings forecasts in generating stock recommendations?. The Accounting Review, 79(1), pp. 25-50. https://doi.org/2139/ssrn.256438
6. Bradshaw, M.T., Huang, A.G. and Tan, H. (2012). Analyst target prices and forecast accuracy around the world. Boston College, USA.
7. Brav, L. and Lehavy, R. (2003). An empirical analysis of analysts’ target prices: short-term informativeness and long-term dynamics. The Journal of Finance, 58(5), 1933-1967.
8. Brown, L.D. (1993). A temporal analysis of earnings surprises: Profits versus losses. Journal of Accounting Research, 39(2), 221–241.
9. Cheong, C.S. and Zurbruegg, R. (2016). Analyst forecasts and stock price informativeness: Some international evidence on the role of audit quality. Journal of Contemporary Accounting & Economics, 12(3), 257-273. https://doi.org/10.1016/j.jcae.2016.09.002.
10. Crawford, S.S., Roulstone, D.T. and So, E.C. (2012). Analyst initiations of coverage and stock return synchronicity. The Accounting Review, 87(5), 1527–1553. https://doi.org/2308/accr-50186.
11. Ferrereira, M.A. and Santa-Clara, P. (2008). Forecasting stock market returns: The sum of the parts is more than the whole. Journal of Financial Economics, 100(3), 514-537. https://doi.org/10.1016/j.jfineco.2011.02.003
12. Gabriel, A.M. and Ugochukwu, W.M. (2012). Volatility Estimation and Stock Price Prediction in the Nigerian Stock Market.International Journal of Financial Research, 3(1), 1-14. https://doi.org/5430/ijfr.v3n1p2 URL
13. Gleason, C.A. and Lee, C.M.C. (2003). Analyst forecast revisions and market price discovery. The Accounting Review, 78(1), 193-225. https://doi.org/10.2308/accr.2003.78.1.193
14. Gleason, C.A., Johnson, W.B. and Li, H. (2008). Valuation model use and the price target performance of sell-side equity analysts. Tippie College of Business, University of Iowa, Iowa City, IA 52242.
15. Grivoly, D. and Lakonishok, J. (1984). The quality of analysts' forecasts of earnings. Financial Analysts Journal, 40(5), 40-47.
16. Groysberg, B., Healy, P., Nohria, N. and Serateim, G. (2011). What factors drive analyst forecasts?. Financial Analysts Journal, 67(4), 18-29.
17. Hollie, P., Shane, P.B. and Zhao, Q. (2017). The role of financial analysts in stock market efficiency with respect to annual earnings and its cash and accrual components. Accounting and Finance, 57(1), 199–237. http://dx.doi.org/10.1111/acfi.12138
18. Ibrahim, S.O. (2017). Forecasting the volatilities of the Nigeria stock market prices. CBN Journal of Applied Statistics, 8(2), 23-45.
19. Jiani, W. and Liu, M. (2014). The Accuracy and Effectiveness of Securities Analysts’ Pricing Forecast—Empirical Research based on A-share IPOs. Procedia Computer Science, 31, pp. 587-596. https://doi.org/10.1016/j.procs.2014.05.305
20. Kahneman, D. and Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263-291. https://doi.org/2307/1914185.
21. Kim, Y. and Song, M. (2015). Management earnings forecasts and value of analyst forecast revisions. Management Science, 61(7), 1663-683. https://doi.org/10.1287/mnsc.2014.1920
22. Lui, D., Markov, S. and Tamayo, A. (2010). Equity analyst and the market’s assessment of risk. The University of Texas at Dallas School of Management.
23. Mallikarjuna, M. and Rao, R.P. (2019). Evaluation of forecasting methods from selected stock market returns. Financial Innovation,5(40). https://doi.org/10.1186/s40854-019-0157-x
24. Malmendier, V. and Shanthikumar, D. (2005). Do security analysts speak in two tongues?. Stanford University, USA.
25. Marhfor, A., M’Zali, B., Cosset, J. and Charest, G. (2013). Stock price informativeness and analyst Canadian Journal of Administrative Sciences, 30(03), 175-188. https://doi.org/10.4236/ajibm.2015.53010.
26. Martinez, A.L. (2010). Analysts’ recommendations and stock performance: An empirical study of Brazilian public companies. Advances in Scientific and Applied Accounting, 3(1), 90-108. DOI: 2139/ssrn.1621013.
27. Mgbame, C.O. and Ohiorenuan, J.F. (2013). Accounting information and stock volatility in the Nigerian capital market: A GARCH Analysis Approach.International Review of Management & Business Research, 2(1), 265-281.
28. Nageri, K.I. (2019). Evaluating volatility persistence of stock returns in the pre and post 2008-2009 financial meltdown. Copernican Journal of Finance and Accounting, 8(3), 73-91. https://doi.org/12775/CJFA.2019.013
29. Palley, A.P., Steffen, T.D. and Zhang, X. F. (2019). Consensus analyst target prices: Information content and implications for investors. Indiana University, USA.
30. Park, C.W. and Stice, E.K. (2000). Analyst forecasting ability and the stock price reaction to forecast revisions. Review of Accounting Studies,5, 259–272. https://doi.org/10.1023/A:1009668711298.
31. Ramnath, S., Rock, S. and Shane, P.B. (2006). Financial analysts’ forecasts and stock recommendations: A review of the research. Foundations and Trends in Finance, 2(4), 311–421. Available at SSRN: https://ssrn.com/abstract=1624980
32. Sancetta, G., Renzi, A. and Orlando, B. (2012). Dispersion in analysts’ forecasts and stock prices: An empirical test. China-USA Business Review, 11(9), 1199-1204.
33. Schipper, K. (1991). Commentary on Analysts’ forecasts. Accounting Horizons, 5(4), 105–131.
34. Shan, Y., Taylor, S. and Walter, T.S. (2014). The role of other information in analysts' forecasts in understanding stock return volatility. Review of Accounting Studies, 19(4), 1346-1392. http://dx.doi.org/10.1007/s11142-013-9272-5
35. Tiberius, V. and Lisiecki, L. (2019). Stock price forecast accuracy and recommendation profitability of financial magazines. International Journal Financial Studies, 7(4), 58-65. https://doi.org/10.3390/ijfs7040058.
36. Wang, M. and Chou, P. (2014). Securities market quality and analysts’ earnings forecast errors. Information Technology Journal, 13, 2645-2657. https://doi.org/3923/itj.2014.2645.2657.
37. Wu, X. (2017). The impact of securities analysts’ prediction on the market. Journal of Financial Risk Management, 6(2), 79-92. https://doi.org/4236/jfrm.2017.62007.
38. Yahaya, O.A. and Alkasim, A. (2020). Market valuation measures and the share price of listed insurance firms in Nigeria. Nigerian Journal of Accounting & Finance, 12(2), 92-108.