Looking Forward: Management Earnings Forecasts and the Value Effect

54 Pages Posted: 23 Jan 2012 Last revised: 4 Aug 2018

See all articles by Takato Hiraki

Takato Hiraki

Tokyo University of Science - School of Management

Akiko Watanabe

University of Alberta - School of Business; University of Alberta - Department of Finance and Statistical Analysis

Masahiro Watanabe

University of Alberta - School of Business; University of Alberta - Department of Finance and Statistical Analysis

Date Written: July 27, 2018

Abstract

We examine the pricing implications of management earnings forecasts by taking advantage of the unique corporate disclosure practice in Japan, where listed firms regularly announce earnings forecasts upon requests by stock exchanges and the press. Calendar-time strategies using the forecasted earnings-to-price ratio earns a premium comparable to, and separate from, the value premium based on the book-to-market ratio. The premium is robust to a variety of factor and characteristic controls including realized and forecasted earnings momentum. The result is more consistent with characteristic pricing than factor pricing and challenges risk-based explanation.

Keywords: Management earnings forecasts, value premium, residual income valuation model

JEL Classification: G12, G15

Suggested Citation

Hiraki, Takato and Watanabe, Akiko and Watanabe, Masahiro, Looking Forward: Management Earnings Forecasts and the Value Effect (July 27, 2018). Available at SSRN: https://ssrn.com/abstract=1989986 or http://dx.doi.org/10.2139/ssrn.1989986

Takato Hiraki (Contact Author)

Tokyo University of Science - School of Management ( email )

6-3-1 NiiJuku Katsushika-Ku
Tokyo, 125-8585
Japan
+81-480-21-7611 (Phone)
+81-480-21-7654 (Fax)

Akiko Watanabe

University of Alberta - School of Business ( email )

3-30A Business Building
University of Alberta
Edmonton, Alberta T6G 2R6
Canada
780-492-0385 (Phone)
780-492-3325 (Fax)

HOME PAGE: http://www.bus.ualberta.ca/awatanabe

University of Alberta - Department of Finance and Statistical Analysis ( email )

2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada

HOME PAGE: http://www.bus.ualberta.ca/awatanabe

Masahiro Watanabe

University of Alberta - School of Business ( email )

School of Business - FMS
University of Alberta
Edmonton, Alberta T6G 2R6
Canada
780-492-7343 (Phone)
780-492-3325 (Fax)

HOME PAGE: http://www.ualberta.ca/~masa/

University of Alberta - Department of Finance and Statistical Analysis ( email )

2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada

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