Analysts dispersion forecast Essay Example | Topics and Well Written Essays - 500 words

Analysts spreading forecast - Essay ExampleAnalyst forecasts refer to customary enshrouds or announcements made by analysts on security valuation. The forecasts emphasise the strengths and concerns from their analysis of the information of the Company and are commonly used by the investors as indications of the delegacy and target price of an underlying security. Consequently, they have a real material impact on the movement of the security. So as to evaluate the impacts of these forecasts on an aggregate basis, our management team has focused their research in Analyst Forecast dispersal. In order to measure investor sentiment of an underlying security, Analyst Forecast Dispersion measures the difference in analyst opinions. A large measure or an increase in dispersion is an indication that thither is greater aggregate dubiety in analyst views in regard to the direction and the target price of an underlying security, and vice-versa. The security is expected to generate lower re turns due to the less sure thing in regard to the intrinsic value this in effect indicates a negative correlation surrounded by future returns and the Analytical Forecast Dispersion.At the beginning, this report examines the historical data for security returns and the Analyst Forecast Dispersion between the period 1983- 2005. Having examined the historical data, we will then identify the importance of the relationship between the two variables so as to drive an appropriate trading strategy. Based on our analysis, there is sufficient empirical evidence confirming our hypothesis that there is a significant negative relationship between the two variables for the hedged portfolios and the Fama-MacBeth analysis for the smaller cap firms. For that reason, therefore, out team would wish to propose a short term momentum strategy through a short position in securities that have high dispersion and a long dispersion in securities with low dispersion. The approach will focus on small-to-med ium cap-sized firms on a one month