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Effectiveness of earnings forecasts in efficient global portfolio construction

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  • Xia, Hui
  • Min, Xinyu
  • Deng, Shijie

Abstract

We analyze the effectiveness of using fundamental variables of earnings forecasts for constructing mean–variance efficient portfolios. The performances of the Markowitz mean–variance optimal portfolios are examined by selecting stocks based on the consensus temporary earnings forecasts (CTEF) data. An empirical analysis on both US domestic equities and international equities is conducted for the period 1997–2010, and we find that the CTEF variable is a statistically significant factor in generating portfolios with active returns over benchmark portfolios.

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  • Xia, Hui & Min, Xinyu & Deng, Shijie, 2015. "Effectiveness of earnings forecasts in efficient global portfolio construction," International Journal of Forecasting, Elsevier, vol. 31(2), pages 568-574.
    • Handle: RePEc:eee:intfor:v:31:y:2015:i:2:p:568-574
    DOI: 10.1016/j.ijforecast.2014.10.004
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    Cited by:

    1. Xiaojian Yu & Xiaoqian Zhang & Donald Lien, 2024. "Robust approach to earnings forecast: A comparison," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 43(5), pages 1530-1558, August.
    2. Yuanyuan Zhang & Xiang Li & Sini Guo, 2018. "Portfolio selection problems with Markowitz’s mean–variance framework: a review of literature," Fuzzy Optimization and Decision Making, Springer, vol. 17(2), pages 125-158, June.
    3. Guerard, John B. & Markowitz, Harry & Xu, GanLin, 2015. "Earnings forecasting in a global stock selection model and efficient portfolio construction and management," International Journal of Forecasting, Elsevier, vol. 31(2), pages 550-560.
    4. Xu, Peng, 2024. "Testing out-of-sample portfolio performance using second-order stochastic dominance constrained optimization approach," International Review of Financial Analysis, Elsevier, vol. 95(PA).

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