The Effects of changes in price and analyst responses of earnings forecasts to stocks indices adjustments

• Main Authors: Tu, Chia Jung, 杜佳蓉
• Other Authors: Chang, Yuanchen
• Format: Others
• Language: en_US
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/46261931994647049195

博士 === 國立政治大學 === 財務管理研究所 === 97 === Two essays are comprised in this dissertation to examine the effects of changes in price and the analyst responses of earnings forecasts to stocks Indices adjustments. Stock markets vary in nature from one country to another and the characteristic of stock index adjustments also alter significantly. The analytical results can provide better information for investors and management to make better decisions. In the first essay, we examine price effects associated with changes in the composition of the Nikkei 225 Index and MSCI Taiwan Index. The analytical results show the price effects on stocks experiencing adjustments in the Nikkei 225 Index are consistent with the price pressure hypothesis. The price effects of composite stocks changed for the MSCI Taiwan Index are consistent with the downward sloping demand curve hypothesis. Based on classifying the characteristics of composite stocks into three categories, we find that large-scale added stocks dominate the price trend of the whole added sample in the Nikkei 225 Index. Also, added stocks with upwards revision earnings forecasts make more abnormal returns than the added stocks with downwards revision earnings forecasts in the Nikkei 225 Index during the post-announcement period. The electronic stocks earn larger abnormal returns than non-electronic stocks in the MSCI Taiwan Index. That can enable investors to profit by buying electronic stocks and added stocks with upwards revision earnings forecasts. The price reactions for the composite stocks in the Nikkei 225 Index and MSCI Taiwan Index around the Internet bubble burst have significantly difference. In the second essay, we study the earnings forecast changes and absolute forecast errors made by analysts of the Nikkei 225 Index and MSCI Taiwan Index. Depending on the properties of brokerage firms that analysts work for, we divide them into local analysts and foreign analysts to separate who are more accurate than one the other. The results show that in comparison with the matching firms in Japan, the magnitudes of mean forecast revisions and absolute forecast errors are smaller made by analysts focusing on firms newly added to the Nikkei 225 Index. For firms newly added to the MSCI Taiwan Index, the magnitude of changes in analysts EPS forecasts do not differ clearly from those of their peer groups. Absolute forecast errors made by analysts focusing on firms newly added to the MSCI Taiwan Index are smaller than those made by analysts focusing on the matching firms. This phenomenon demonstrates firms that are newly added to the Nikkei 225 Index and MSCI Taiwan index exhibit significantly improved performance. In terms of the relative accuracy of local and foreign analysts, the results display that the forecasts of foreign analysts are less accurate than those of local analysts in Japan and the forecasts of foreign analysts are more accurate than those of local analysts in Taiwan.