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Dubois, Michel

Nom
Dubois, Michel
Affiliation principale
Site web
Fonction
Professeur ordinaire
Email
michel.dubois@unine.ch
Identifiants
https://libra.unine.ch/handle/123456789/231

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  • Publication
    Accès libre
    Three essays on financial analysts' performance
    (2016)
    Moraru-Arfire, Andreea 
    ;
    Dubois, Michel 
    This dissertation is composed of three chapters. The first chapter explores the importance of previously identified factors in explaining the variation in analysts’ earnings forecast error. As earnings forecasts are the main input in determining price targets and consequently stock recommendations, much of the process through which analysts process their input remains in a so-called “black box”. This study attempts to shed light on these inputs. First, it reveals that forecast errors are stable over time, and analysts do not efficiently integrate past information in their forecasts. Second, analysts do not factor in expectations related to the macroeconomic conditions for the underlying forecast horizon. Analysts overreact (underreact) to positive (negative) macroeconomic expectations on both GDP and consumer sentiment index. Third, this study decomposes analysts’ forecast errors variance by observable characteristics and fixed effects. Importantly, the analysis shows that there is an unobserved, time-invariant component related to the firm-analyst dimension that explains much of the variance in the forecast errors. This component is not yet captured by the existing observable characteristics which, at date, have a trifling effect on their own in explaining the variation in analysts’ forecast error.
    In the second chapter, I investigate the role of financial reporting frequency in analysts’ earnings forecasts. I addresses two questions. First, does mandatory quarterly reporting benefit financial analysts in decreasing their earnings forecast error and dispersion? Second, to what extent common accounting standards increase the convergence of analysts’ information set for firms with different reporting frequencies? I find little support to the claim that regulation forcing firms to issue more frequent financial information benefits financial analysts. Compared to a control sample of semiannual reporting firms in the European market, analysts issuing earnings forecasts for firms with mandatory quarterly frequency experience higher forecast error and dispersion. When firms are mandated to report not only on a quarterly frequency, but also under International Financial Reporting Standards (IFRS), analysts’ both forecast error and dispersion decrease. However, while IFRS does benefit analysts by increasing the quality of their information set in absolute terms, they do not wipe out the relative noise associated with mandatory quarterly statements.
    The third chapter focuses on how financial analysts adapt to the passage of regulations aiming at limiting conflicts of interest in the investment banking industry. This last chapter investigates analysts’ price targets and recommendations, and unravels a new form of conflicts of interest. Specifically, it investigates whether affiliated brokers issue unfavourable ratings on their clients’ competitors in the product market (rivals). The findings document an important gap between ratings for affiliated and rival firms. Specifically, brokers issue persistently higher ratings on firms with which they are affiliated compared to their rivals. Importantly, the Sarbanes-Oxley Act and the related financial regulations aiming at curbing the conflicts of interests had no significant impact in reducing this gap. As such, affiliated brokers continue to indirectly favour their clients. This form of conflict was devoid of adequate attention in prior research. Furthermore, investors are unaware of the existence of such conflict in the short-run.
  • Publication
    Accès libre
    Country versus sector influences and financial analysts' specialization
    (2007)
    Sonney, Frédéric
    ;
    Dubois, Michel 
    This thesis is made of three distinct chapters. The second and third chapters constitute the core of this work. Both focus on financial analysts and their performance depending on whether they are specialized along country or sector lines. The first chapter sets the stage of the analysis. It presents and evaluates the relative strength of country and sector factors in stock returns. Short abstracts of these three chapters appear below. Chapter 1 This paper investigates the relative influences of industrial and country factors in international stock returns. Until very recently, academic research has consistently found that country factors dominate industrial factors. This result is in contradiction with practitioners beliefs. This paper re-examines this issue by analyzing a sample of more than 4000 stocks quoted in 20 developed countries. We find that on average the country effect still dominates stock returns over the period 1997-2000. This result has to be interpreted with caution though, as an analysis that allows for time-varying relative influences demonstrates the rapidly increasing impact of industry effects in recent times. We find, in particular, that this trend is common to all 20 developed countries considered and not only to those that are member of the European Monetary Union. We interpret this result as evidence of the increasing globalization of international equity markets. Chapter 2 Brokerage houses normally structure their research activities along either country or sector lines. I investigate whether organizational structure affects the quality of financial analysts’ earnings forecasts. Specifically, I compare the performance of country-specialized financial analysts with that of sector-specialized financial analysts. The former issue forecasts considerably more accurately than the latter. Country specialists benefit from an informational advantage over sector specialists. A superior knowledge of country-specific factors, as well as geographical proximity between analysts and the firms they cover, are significant determinants of this advantage. Chapter 3 Brokerage houses usually organize their research activities along country or economic sector dimensions. We evaluate which research structure provides most value to investors. To this end, we study the relative information content of stock recommendations issued by country-specialized analysts versus those issued by sector-specialized analysts. Our findings reveal that the former issue more valuable recommendations. The strength of country-specific commonalities explains at least part of the out performance of country-specialized financial analysts. Surprisingly, while analysts’ geographical location has been shown in the literature to be a determinant of earnings forecast accuracy, it is not a source of a comparative advantage when it comes to stock recommendations.