Practical analysis for investment professionals

Forecasting


Beware of Experts Bearing Forecasts

As finance gurus forecast a market that's variously overvalued, undervalued, ready to plunge off the cliff, or blast off to new heights, remember to tune out the noise and stay invested for the long run, says Mark Armbruster, CFA.

In Practice Summary: Build in Buybacks for Better Forecasts

When investors forecast long-run drivers of stock returns, are cash dividends or payouts such as buybacks more accurate criteria than fundamentals? A new study suggests that they are. Mark Harrison, CFA, explains.

Research Analysts Add Value: Here’s Proof

Post-event analyst forecasts — those made subsequent to recent results or management guidance — are significantly more accurate than management forecasts, reports Jeremy Monk. And if analysts can provide insight into tangible measures of value, then we can presume they are also able to offer insight into other, less tangible measures of value, such as management quality and industry outlook.

Count on Low Expected Returns, Says Antti Ilmanen

“It is not only a low interest rate world, it is also a low expected return world on any long-only investment,” said Antti Ilmanen, in his presentation at the 2016 CFA Institute European Investment Conference. Low expected returns are going to anchor bad news for all of us for the rest of our working lifetimes, he said, and maybe beyond.

Dumb Alpha: Trailing or Forward Earnings?

In the spirit of dumb alpha, we can say that simple trailing P/E ratios are far better value indicators than forward P/E ratios. Or as I tell my colleagues at work: Never ever use forward P/E ratios. Ever.

The Vagaries of Using CAPE to Forecast Returns

Historically the CAPE ratio has worked well in predicting the future real returns of stock markets. But recently the earnings side of the CAPE ratio has come under increased scrutiny.

Dumb Alpha: Are Your Forecasts Better Than a Random Walk?

Research confirms a “wisdom of the crowds” effect insofar as only a few analysts seem able to consistently outperform the consensus forecast compiled from many different analysts.

Essential Listening: Accurate Forecasters

One of the purposes of the Essential Listening series is to help in discovery, says Tadas Viskanta of Abnormal Returns. Among the challenges facing professionals, including those of us in the investing field, is finding new and interesting content.

Enron Revisited: Highlights from Bear Stearns Research

Today, it's hard to remember Enron as anything but a classic example of hubris and fraud. But the market didn't always know that. A recently revealed Bear Stearns research note shows just what the market thought of Enron in the heady days of early 2001.

Making Sense of Long-Term Returns

All advisers face the same challenge: How can we best help investors understand what sort of long-term returns they can rationally expect?



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