Capitalising on Analyst Earnings Estimates and Recommendations During Different Market Volatility Regime Periods in Europe

Journal of Asset Management, Vol. 8, No. 2, 2007

Posted: 1 Apr 2009

Date Written: June 30, 2007

Abstract

Examining market-adjusted cumulative abnormal returns following European analyst earnings estimate and recommendation announcements, I find that both factors are significant when considered unconditionally and conditional on each other. When examining the strength of these factors during different market regime periods, however, I find that when the market or stock volatility for a given month is unusually high or dispersion between the market and stock volatilities is unusually low, the significance of both the EPS estimate and recommendation factors decrease or are non-existent. In addition, the least favorable quintile of securities - as measured by change in the earnings or recommendation factor - no longer exhibits the least favorable market-adjusted cumulative abnormal return. Since volatility is somewhat persistent, modifying analyst factor models based on recent market environments increases potential portfolio returns.

Keywords: Volatility, Regime, Europe, Earnings, Security Analysts

JEL Classification: G14, G15

Suggested Citation

Au, Andrea S., Capitalising on Analyst Earnings Estimates and Recommendations During Different Market Volatility Regime Periods in Europe (June 30, 2007). Journal of Asset Management, Vol. 8, No. 2, 2007, Available at SSRN: https://ssrn.com/abstract=1371253

Andrea S. Au (Contact Author)

State Street Corporation ( email )

State Street Financial Center
1 Lincoln Street
Boston, MA 02111
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
492
PlumX Metrics