Forecast precision and portfolio performance

Alex Kane, Tae Hwan Kim, Halbert White

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

Abstract

This paper investigates the connection between the forecast precision of security analysts and the superior performance of portfolios constructed optimally on the basis of their predictions. In particular, we are interested in the threshold of predictive power that makes for a positive economic contribution of security analysts. Results can be viewed as good news for security analysts. A correlation coefficient between forecast and realized abnormal returns as low as 0.032 will render a security analyst valuable.

Original languageEnglish
Article numbernbq018
Pages (from-to)265-304
Number of pages40
JournalJournal of Financial Econometrics
Volume8
Issue number3
DOIs
Publication statusPublished - 2010 May 21

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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