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December 17th, 2013
James Weir
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What value forecasts?

We have long been sceptical about the value that stock broking analysts add to our and our clients’ lives. The two charts below serve to reinforce that view.

The first table below comes from Barry Ritholtz’s blog The Big Picture. It lists the forecasts made at the beginning of the year by the fourteen biggest investment banks in the United States of where the S&P500 would be by the end of 2013.

forecasts1

The second chart was published by Deutsche Bank’s Australian equities strategist, Tim Barker, on 3 December. He analysed the returns from consensus analyst recommendations by grouping them into quintiles of popularity, rebalanced them each quarter and assessed their returns over successive years. The results are not flattering for analysts: whilst they did by and large get the sell recommendations right, the buy recommendations were the worst performing!

forecast2

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