This study explores analyst annual earnings forecasts in New Zealand. The results show that forecasts of New Zealand firms do not suffer from the pessimistic biases found in studies of forecasts for United States firms. Similar to United States studies, however, loss firm forecasts are significantly less accurate and more optimistic. These results suggest that New Zealand firms do not tend to manage earnings to beat expectations, but poorly performing firms might attempt to deceive investors by decreasing the quality of their information environment. Furthermore, optimism does appear to be impounded in stock prices, as firms with optimistic forecasts underperform firms with pessimistic forecasts by about 30%.
Investment Management and Financial Innovations
Etebari, A. “Analyst Forecasts in New Zealand,” (with Stephen Ciccone) Investment Management and Financial Innovation, 4(2), 2007.