Company Valuation and Information in Analyst Forecasts

Company Valuation and Information in Analyst Forecasts

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This thesis focuses on the three primitive value drivers of each company valuation model that is based on fundamental analysis: the discount rate, the expected future payoffs during the explicit forecasting period, and the terminal value at the end of the explicit forecasting period. While the first factor is analyzed theoretically by incorporating the government into the classical valuation framework, this thesis studies the other two factors by investigating forecasts made by professional investors, i.e. financial analysts. In the first part we show that the government's and the shareholders discount rate usually differ and analyze how the government's and shareholders different objectives lead to conflicts in the context of capital budgeting. The empirical part of this thesis shows that macroeconomic information is frequently used by financial analysts when updating their earnings expecations and that target price forecastsmade by financial analysts can be used to predict abnormal returns.... and Brown 2006), which would be reasonable if target prices provided no profitable investment advice to investors. ... (1991) extract implicit abnormal return estimates implied in target prices for the Canadian stock market and find postanbsp;...

Title:Company Valuation and Information in Analyst Forecasts
Author: Daniel Kreutzmann
Publisher:Logos Verlag Berlin GmbH - 2010

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