Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • Article
  • Journal of Financial Economics

Can Analysts Assess Fundamental Risk and Valuation Uncertainty? An Empirical Analysis of Scenario-Based Value Estimates

By: Peter R. Joos, Joseph D. Piotroski and Suraj Srinivasan
  • Format:Print
ShareBar

Abstract

We use a dataset of sell-side analysts' scenario-based valuation estimates to examine whether analysts reliably assess the risk surrounding a firm's fundamental value. We find that the spread in analysts' state-side contingent valuations captures the riskiness of operations and predicts the absolute magnitude of future long-run valuation errors and changes in fundamentals. Similarly, asymmetry embedded in the analysts' scenario-based valuations conveys information about asymmetric risk-reward exposure and predicts skewness in future long-run valuation errors; however, embedded asymmetry is not correlated with changes in fundamentals. The results confirm that analysts' valuations reflect both state-contingent risk assessments and non-fundamental factors.

Keywords

Analyst Forecasts; Scenarios; Uncertainty; Risk and Uncertainty; Valuation; Forecasting and Prediction

Citation

Joos, Peter R., Joseph D. Piotroski, and Suraj Srinivasan. "Can Analysts Assess Fundamental Risk and Valuation Uncertainty? An Empirical Analysis of Scenario-Based Value Estimates." Journal of Financial Economics 121, no. 3 (September 2016): 645–663.
  • SSRN
  • Find it at Harvard

About The Author

Suraj Srinivasan

Accounting and Management
→More Publications

More from the Authors

    • February 2022
    • Faculty Research

    Creating and Measuring Purpose at Viega

    By: Ethan Rouen, Suraj Srinivasan and James Barnett
    • December 2021
    • Faculty Research

    Burning Glass Technologies: From Data to Product

    By: Suraj Srinivasan and Amy Klopfenstein
    • December 1, 2021
    • Harvard Business Review Digital Articles

    Do You Know How Your Teams Get Work Done?

    By: Rohan Narayana Murty, Rajath B. Das, Scott Duke Kominers, Arjun Narayan, Suraj Srinivasan, Tarun Khanna and Kartik Hosanagar
More from the Authors
  • Creating and Measuring Purpose at Viega By: Ethan Rouen, Suraj Srinivasan and James Barnett
  • Burning Glass Technologies: From Data to Product By: Suraj Srinivasan and Amy Klopfenstein
  • Do You Know How Your Teams Get Work Done? By: Rohan Narayana Murty, Rajath B. Das, Scott Duke Kominers, Arjun Narayan, Suraj Srinivasan, Tarun Khanna and Kartik Hosanagar
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College