Year: | 2022 |
Subject: | Stock price forecasting Stocks -- Prices Corporate profits -- Forecasting Corporations -- Finance Hong Kong Polytechnic University -- Dissertations |
Department: | School of Accounting and Finance |
Pages: | x, 96 pages : color illustrations |
Language: | English |
Abstract: | This thesis consists of two essays. The commonality of the essays is the valuation effects of missing analyst earnings forecasts as firms age. Missing analyst earnings forecasts may lead to earnings torpedoes. Earnings torpedo, as Skinner and Sloan (2002) note, is the fact that “missing analysts’ forecasts, even by small amounts, causes disproportionately large stock price declines.” This excessively large price drop reflects that the overoptimistic investors are disappointed and revise downward to the prior optimism. If young firms – firms going public recently – generally have overoptimistic investors, in the first essay, I examine whether younger firms face higher earnings torpedo risk. The second essay examines what role the accumulation of missing analyst forecasts plays in the negative relation between M/B and firm age. To sell their shares successfully or at a higher valuation, firms raise investor expectations when going public. The risk from having overoptimistic investors is obvious and well documented in literature on post-IPO long-run performance. Nonetheless, how the inferior long-run returns to IPO firms are realized is not well investigated. This thesis addresses the channel in which investors’ overly optimistic expectations formed at IPO are revised down in the post-IPO market when the realized earnings disappoint investors. Specifically, in the first essay, I examine whether younger firms face higher earnings torpedo risk. My study show that younger firms experience a disproportionately larger price drop to negative earnings surprises. The magnitude of average abnormal returns around negative earnings surprises declines from around 8% to near zero in firm age, and similar trend is not observed around positive earnings surprises. Analysts following younger firms revise analysts revise their earnings forecasts down more when the firms they follow miss analyst forecasts. Younger firms are more likely to release management forecasts to guide expectations down after missing analyst forecasts. Consequently, the likelihood of missing analyst forecasts declines as firms age. The findings support that younger firms face higher earnings torpedo risk and suggest that missing analyst forecasts may be one channel through which the overly optimistic expectations at IPO are revised. In the second essay, I examine whether missing analyst forecasts serves as one channel through which the overly optimistic expectations at IPO are revised. Specifically, I extend on Pastor and Veronesi’s learning model and investigate whether the accumulation of missing analyst forecasts in a firm plays a role in the negative relation between market valuation and firm age. Pastor and Veronesi (2003) model that expected terminal value of equity increases with uncertainty about future profitability due to the convexity of compounding; uncertainty decreases over a firm’s lifetime as information about the firm’s profitability piles up. Proxy for the declining uncertainty, firm age is negatively associated with market valuation. I argue that missing analyst forecasts both reduces uncertainty and leads to downward revisions to prior optimism formed at IPO, hence lowering firm valuation. The adverse effect should be larger due to the higher earnings torpedo risk in younger firms. This implies that, as a proxy for firm valuation, M/B and changes in M/B should be related to the frequency and timing of missing consensus analyst earnings forecast. Constructing two measures for the accumulation of missing analyst earnings forecast, I investigate the role of it in the negative relation between firm age and M/B. The two measures address the effects of both the frequency and timing on firm valuation from missing analyst forecasts. My findings show that the accumulation of missing analyst forecasts is positively associated with firm age and negatively associated with market to book ratio. More importantly, the effect of firm age on market-to-book ratio declines or diminishes after controlling the accumulation of missing analyst forecasts; the effect of firm age on the annual change in M/B declines after considering whether firms miss analyst forecasts in that year. Moreover, the accumulation of missing analyst forecasts is incremental to explain the market-to-book ratio in the cross section. My findings suggest that missing analyst forecasts is one channel through which the decline in M/B over a firm’s lifetime is realized. In sum, my two essays enhance our understanding how the downfall of IPO firms is realized and on the role of missing analyst forecasts in reshaping firms’ valuation as they age. |
Rights: | All rights reserved |
Access: | open access |
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1 Choose a tone. Before you begin to write your reflective essay, choose a tone. Because a reflective essay is more personal than an academic essay, you don't need to use a strict, formal tone. You can also use personal pronouns like I and me in your essay because this essay is about your personal experiences.
Writing Critical Reflection. Reflective writing is a common genre in classrooms across disciplines. Reflections often take the form of narrative essays that summarize an experience or express changes in thinking over time. Initially, reflective writing may seem pretty straightforward; but since reflective writing summarizes personal experience, reflections can easily lose their structure and ...
A reflective essay describes events and encounters that lead to a personal revelation, but the writer should save the lesson learned for the essay's conclusion. > ... As in any essay, the concluding paragraph of a reflective piece should restate the main point of the work or the life lesson that you've taken away from the experience you ...
The Writing Center's Response: The function of a conclusion is to offer a sense of closure or completion for the ideas presented earlier in the paper. In this sample, the writer signals the end with the phrase "In conclusion" and goes on to summarize the main points of the reflection paper. The success of this paragraph lies in its final ...
A reflection is an essay, so provide full, thoughtful responses to the questions in your instructor's prompt. The style and tone of your reflective essay should match the purpose of the overall assignment. This is a personal essay meant to showcase what you learned from the text, event, or experience that you are writing about.
1. Identify the topic you will be writing on. 2. Note down any ideas that are related to the topic and if you want to, try drawing a diagram to link together any topics, theories, and ideas. 3. Allow your ideas to flow freely, knowing that you will always have time to edit your reflective essay. 4.
Step 6: Create an introduction of your reflection paper. Step 7: Think what you will include in the main body of your text. Start writing your body paragraphs. Step 8: Diversify your text with all the necessary details to make your readers see a clear picture of the environment in your story.
Make sure to use specific examples and details to support your reflection. 5. Writing the Conclusion. Write the conclusion for your essay, which should summarize the key points of your reflection and provide closure for the reader. You can also include a final reflection on the experience and what it means to you. 6.
The first body paragraph should mention the impactful impression your subject has made on you. Then, provide relevant facts to support your thesis statement. Moreover, the body of your essay will also describe most of the ideas you touched on in your introduction. 3. Write a Conclusion.
Every essay you write, including reflective essays, should have three parts: an introduction, a body, and a conclusion. The reflective essay should have those parts as well. However, the way a reflective essay is organized might be a little different. Let's go through each of those parts for a reflective essay. Each part will include a sample.
Feelings - How you felt before, during, and after the experience you describe. Evaluation and Analysis - Think about what went well and what could be improved upon based on your experience. Try to refer to ideas you've learned in class while thinking about this. Conclusions - Final thoughts on what you've learned from the experience.
Writing a reflective essay. When you are asked to write a reflective essay, you should closely examine both the question and the marking criteria. This will help you to understand what you are being asked to do. Once you have examined the question you should start to plan and develop your essay by considering the following:
Step 1: Return to your thesis. To begin your conclusion, signal that the essay is coming to an end by returning to your overall argument. Don't just repeat your thesis statement—instead, try to rephrase your argument in a way that shows how it has been developed since the introduction.. Example: Returning to the thesis Braille paved the way for dramatic cultural changes in the way blind ...
How to Create a Reflective Essay Outline. Analyze the task you've received. Read through and understand the marking criteria. Keep a reflective journal during the experience. Use a reflective framework (Schon, Driscoll, Gibbs, and Kolb) to help you analyze the experience.
In this regard, reflective essays are a lot like the other types of essays too. When writing a reflective essay, you will have to examine your own life experiences. ... With a good outline, you have a better idea of how your essay will flow from one paragraph to the next all the way to the conclusion. When creating the outline of your ...
Writing a reflective essay, also known as a reflective paper or reflection paper, is as easy as following the step-by-step instructions below. 1. Choose a Topic Idea. If you haven't been assigned a topic and don't have a topic in mind, check the list of topics above for inspiration. If those aren't enough, take a look at these 100 reflection ...
You certainly don't want to bore anyone, so pick something interesting, but important. c) Organize your essay and divide it into a couple of paragraphs. Each paragraph should contain one important idea. d) Decide in which sequence you would like to share your ideas. Put some logic and chronology behind it.
Writing a Reflective Essay: The Process. Writing a reflective essay involves several key steps that will help you deliver a well-rounded and insightful piece. Here is a step-by-step guide to help you through the process: Choose Your Topic: Your topic should be personal and meaningful to you.
Topics for Reflective Essays on Nature. A reflective essay should provide the reader with a deeper and more meaningful experience. In addition to making your writing process more interesting, writing about nature also stimulates your imagination. The following are some good reflective essay topics about nature: Mountain climbing; Ocean diving
The conclusion brings together the key points of the essay and restates the central argument in light of the evidence provided in the main body. This is your opportunity to synthesise your ideas into a coherent conclusion, summarise what you have written, and reiterate the thesis statement from your introduction.
One of the 17 wonderful essays in "Magically Black," a short stunner called "Lost," emerges as one of those pieces I wish the entire country would read on the same day.
The commonality of the essays is the valuation effects of missing analyst earnings forecasts as firms age. Missing analyst earnings forecasts may lead to earnings torpedoes. Earnings torpedo, as Skinner and Sloan (2002) note, is the fact that "missing analysts' forecasts, even by small amounts, causes disproportionately large stock price ...