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| Tekijä: | Balboa, M. Gomez-Sala, J.C. Lopez-Espinosa, G. |
| Otsikko: | The value of adjusting the bias in recommendations: international evidence |
| Lehti: | European Financial Management
2009 : JAN, VOL. 15:1, p. 208-230 |
| Asiasana: | international portfolio management finance investment strategy |
| Kieli: | eng |
| Tiivistelmä: | The financial literature shows both earnings forecasts and investment (hereafter as: inv.) recommendations being optimistically biased. This paper uses an international context to study whether profitable inv. strategies (as: strs.) exist when adjusting the recommendation bias of each analyzed country (as: ctr). The adjustment proposed to correct the bias takes into account ctr. differences, also varying in time to correct for the bias changes over time within countries (as: ctrs). The empirical results show that in fact there are significant differences in the level of bias among ctrs., with the U.S. and the U.K. being the highest bias ctrs. Second, the adjusted consensus portfolios are more orthogonal to typical inv. styles. It is found that investors could implement a higher number of profitable inv. strs. using this adjusted measure. It is shown that the lowest bias ctrs. get the highest risk adjusted abnormal returns. Third, this study has a practical implication, as it shows the value embedded in a simple necessary adjustment in the global asset management context. This important result shows that profitable inv. strs. exist when considering a global portfolio based on adjusted recommendations. |
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