The Impact of Analyst Forecast Errors on Fundamental Indexation: The Australian Evidence

Hambusch, G; Hitchen, J; Casavecchia, L

The Impact of Analyst Forecast Errors on Fundamental Indexation: The Australian Evidence

Hambusch, G

Hitchen, J Casavecchia, L

Permalink

Publisher:: Palgrave Macmillan
Publication Type:: Journal Article
Citation:: The Journal of Asset Management, 2022, pp. 1-1
Issue Date:: 2022

Open Access

Copyright Clearance Process

Recently Added
In Progress
Open Access

This item is open access.

Adobe PDF

Download Published versionAdobe PDF (721.68 kB)

View on publisher's site

View statistics

Full metadata record

Field	Value	Language
dc.contributor.author	Hambusch, G https://orcid.org/0000-0003-4289-4279
dc.contributor.author	Hitchen, J
dc.contributor.author	Casavecchia, L https://orcid.org/0000-0003-1452-3059
dc.date.accessioned	2022-08-09T06:17:28Z
dc.date.available	2022-08-09T06:17:28Z
dc.date.issued	2022
dc.identifier.citation	The Journal of Asset Management, 2022, pp. 1-1
dc.identifier.issn	1470-8272
dc.identifier.issn	1479-179X
dc.identifier.uri	http://hdl.handle.net/10453/159807
dc.description.abstract	<jats:title>Abstract</jats:title><jats:p>Evidence from many developed markets suggests that fundamental indices outperform capitalisation-weighted indices. Existing studies suspect a story of market mispricing, yet a mechanism has not been identified. Using Australian data, we study the relation between analyst forecast errors and the performance of various fundamental indices. We find that fundamental indices contain a relatively higher exposure to stocks with low analyst long-term growth forecasts. Valuations for these stocks are <jats:italic>ex ante</jats:italic> overly pessimistic and drive the statistical significance of alphas produced by fundamental indexation. We show how hedging against analyst forecast errors can generate additional alpha for investors using fundamental indexation.</jats:p>
dc.language	en
dc.publisher	Palgrave Macmillan
dc.relation.ispartof	The Journal of Asset Management
dc.relation.isbasedon	10.1057/s41260-022-00276-y
dc.rights	info:eu-repo/semantics/openAccess
dc.subject	1502 Banking, Finance and Investment
dc.title	The Impact of Analyst Forecast Errors on Fundamental Indexation: The Australian Evidence
dc.type	Journal Article
utslib.for	1502 Banking, Finance and Investment
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Finance Discipline
utslib.copyright.status	open_access	*
pubs.consider-herdc	true
dc.date.updated	2022-08-09T06:17:27Z
pubs.publication-status	Published

Abstract:

AbstractEvidence from many developed markets suggests that fundamental indices outperform capitalisation-weighted indices. Existing studies suspect a story of market mispricing, yet a mechanism has not been identified. Using Australian data, we study the relation between analyst forecast errors and the performance of various fundamental indices. We find that fundamental indices contain a relatively higher exposure to stocks with low analyst long-term growth forecasts. Valuations for these stocks are ex ante overly pessimistic and drive the statistical significance of alphas produced by fundamental indexation. We show how hedging against analyst forecast errors can generate additional alpha for investors using fundamental indexation.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/159807