Introduction to Financial Forecasting in Investment Analysis
Introduction to Financial Forecasting in Investment Analysis

Author: John B. Guerard, Jr.

Publisher: Springer Science & Business Media

Published: 2013-01-04

Total Pages: 245

ISBN-13: 1461452392

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Forecasting—the art and science of predicting future outcomes—has become a crucial skill in business and economic analysis. This volume introduces the reader to the tools, methods, and techniques of forecasting, specifically as they apply to financial and investing decisions. With an emphasis on "earnings per share" (eps), the author presents a data-oriented text on financial forecasting, understanding financial data, assessing firm financial strategies (such as share buybacks and R&D spending), creating efficient portfolios, and hedging stock portfolios with financial futures. The opening chapters explain how to understand economic fluctuations and how the stock market leads the general economic trend; introduce the concept of portfolio construction and how movements in the economy influence stock price movements; and introduce the reader to the forecasting process, including exponential smoothing and time series model estimations. Subsequent chapters examine the composite index of leading economic indicators (LEI); review financial statement analysis and mean-variance efficient portfolios; and assess the effectiveness of analysts’ earnings forecasts. Using data from such firms as Intel, General Electric, and Hitachi, Guerard demonstrates how forecasting tools can be applied to understand the business cycle, evaluate market risk, and demonstrate the impact of global stock selection modeling and portfolio construction.

Earnings Per Share
Earnings Per Share

Author: Pitabas Mohanty

Publisher: LAP Lambert Academic Publishing

Published: 2010-05

Total Pages: 132

ISBN-13: 9783838362755

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A survey of the way equity research is being done in India revealed that analysts mainly use the P/E approach to value the stock. The most difficult part of equity research is also found to be the largely unpredictable nature of P/E ratio. This book attempts to answer the question of whether excess return can be earned by forecasting EPS alone. Using a Logit-based forecasting model, Ou and Penman (1989) have shown that excess return can be obtained by forecast¬ing the direction of movement of EPS in the US capital market. A similar study done here for the Indian stock market shows that one can obtain excess return by forecasting the direction of movement of the EPS. In the second part of the book, an attempt has been made to empirically test APT in India. However, it is found out that none of the factors seem to be priced in India. This may either mean that the sample size is too small to do any meaningful test of APT. It may also mean that the APT does not work in the Indian context.