Real Cash Flow Expectations and Asset Prices

O, Ricardo De la; Myers, Sean

doi:10.2139/ssrn.3867773

Cited by 3 publications

(3 citation statements)

References 54 publications

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“…There is recent compelling evidence of the importance of such subjective expectations in financial markets, too. De La O and Myers (2021a, 2021b) and Zeng and Zhao (2021) argue that survey‐based subjective growth expectations can explain much of the movement in aggregate stock prices.…”

Section: Data Description and Methodology Choicesmentioning

confidence: 99%

“…Another dimension of our study is to evaluate inflation shocks based on both subjective expectations (from surveys) and objective expectations (from the realized CPI time series). Recent literature (De La O & Myers, 2021a, 2021b; Zeng & Zhao, 2021) have argued that survey‐based subjective expectations, particularly growth expectations, are relatively more useful in understanding stock price movements than are comparable objective expectations (which are derived from time‐series models of the economic variable or economic‐model calibrations). Their evidence suggests that time‐varying growth expectations, when measured with subjective expectations, are relatively more important than time‐varying risk premia in understanding equity return behavior, at odds with well‐known theory such as the habit formation model of Campbell and Cochrane (1999) or the long‐run risk model of Bansal and Yaron (2004).…”

Section: Other Economic Channels and Related Implicationsmentioning

confidence: 99%

“…Additionally, De La O and Myers (2021a, 2021b) and Zeng and Zhao (2021) argue that survey‐based subjective growth expectations can account for much of the movement in aggregate stock prices. This literature importantly bears on the relative importance of time‐varying growth expectations versus time‐varying risk premia in understanding equity return behavior.…”

Section: Introductionmentioning

confidence: 99%

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Stock returns and inflation shocks in weaker economic times

Connolly

Stivers

Sun

2021

Financial Management

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We show that the concurrent relation between quarterly stock returns and inflation shocks is economically and robustly significant only over weaker economic (WE) times, strongly negative prior to the late 1990s, and strongly positive afterwards. Conversely, in the stronger economic times over our 1981 to 2017 sample, this stock-inflation relation is relatively much smaller and usually marginally negative. Our evidence suggests a role for two complementary channels. First, we find consistent state-dependent patterns in how inflation shocks are related to expected economic growth and the equity risk premium, indicating that inflation nonneutrality is stronger over WE times. Second, our findings imply that the inflation signal about the underlying economic state intensifies during WE times, due to the elevated economic-state uncertainty then. We also contribute by contrasting subjective (survey-based) versus objective inflation shocks and by evaluating the relation between inflation shocks and forward equity yields.

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Section: Data Description and Methodology Choicesmentioning

confidence: 99%

Section: Other Economic Channels and Related Implicationsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Stock returns and inflation shocks in weaker economic times

Connolly

Stivers

Sun

2021

Financial Management

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From Hindsight to Foresight: Understanding and Overcoming Bias in Financial Forecasts

Zweig,

Sumner,

Luke

2024

Journal of Business Valuation and Economic Loss Analysis

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This study conducts a comprehensive benchmarking analysis on analyst forecasts of revenue and EBITDA for exchange-traded public companies in the U.S. spanning the period from 2009 to 2022. Our findings reveal a consistent and statistically significant upward bias present in both revenue and EBITDA forecasts, on average, as evidenced by various measures of forecast error. This bias is explored at both market sector and market-wide levels of aggregation to check for macro-consistency. Recognizing the significance of these biases, we propose bias-adjustment frameworks aimed at enhancing the accuracy of future analyst forecasts pertaining to revenue and EBITDA. The implications of our study underscore the importance of mitigating such biases for improved forecasting precision in financial markets.

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