Trusting Analysts

How much should we trust analysts? How accurate are they? Let’s discuss the empirical historical evidence on this.
The proposed test – analyzing the accuracy of analysts in forecasting year end targets for Malaysia’s FBM KLCI index.

The parameters of our analysis are as follows:
– at least 5 research recommendations for a particular target year
on best effort basis – the source shall be published before the target year or Q1 of the current target year

The results of our tests are as follows:

FBMKLCI_Analysts.png
A simple conclusion:
– the selected analysts tend to underestimate when the market is on a downtrend, overestimate when the market is on the uptrend
– average differential rate against mean / median (since 2010) – approximately 2.0% (overestimation)

List of sources used to compile the above stats:

2010
http://ck5354.blogspot.my/2009/12/osk-3rd-quarter-earning-09.html
http://www.pidm.gov.my/dailynews/2010/feb/030210/E17.pdf
http://klse-bursa.blogspot.com/2009/12/klci-end-of-2010-target-raised-to-1400.html
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=20&cad=rja&uact=8&ved=0ahUKEwiU97zhqafRAhULp48KHSFnA8s4ChAWCEwwCQ&url=http%3A%2F%2Fturtleinvestor888.blogspot.com%2F2009%2F12%2Fmy-2010-klci-target.html&usg=AFQjCNERRtxuBrCobyY-7FDSPOYXL0B4Dw&sig2=W6um3Ny0rl1oYsr-cwNOIQ&bvm=bv.142059868,d.c2I
http://www.thestar.com.my/business/business-news/2010/02/08/25-msian-stocks-that-are-expected-to-outperform-the-fbm-klci/

2011
http://1-million-dollar-blog.com/fbm-klci-2011-year-end-target-compilation/

2012
http://www.thestar.com.my/business/business-news/2012/01/07/ubs-sees-fbm-klci-hitting-1700-points-by-yearend/
http://www.thesundaily.my/news/254772
http://www.theborneopost.com/2011/09/06/hlib-research-cuts-year-end-target-for-fbm-klci/
http://jeannekong.blogspot.my/2011/12/normal-0-challenging-year-ahead.html

2013
https://sg.finance.yahoo.com/news/midf-research-reaffirms-end-2013-030003581.html
http://www.theedgemarkets.com/my/article/cimb-research-maintains-neutral-m%E2%80%99sia-end-2013-klci-target-1640-points
https://www.ammetlife.com/assets/files/about-us/financial-reports/AmFamily-Takaful-Investment-Linked-AnnualReport-2013-ENG-20130726115652368.pdf
http://kfc1973-stock.blogspot.my/2012/12/maybank-ib-research-maintains-neutral.html
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=22&cad=rja&uact=8&ved=0ahUKEwi7wJHGsKfRAhXEuY8KHcWAAvs4FBAWCB0wAQ&url=http%3A%2F%2Fwww.kualalumpurpost.net%2Fcitibank-keeps-year-end-klci-target-at-1720%2F&usg=AFQjCNEiw0WlThxvXuXmtuX0DXz7DugKIw&sig2=B8iKW2qOuQji-Ohfj0ijmw

2014
http://www.thestar.com.my/business/business-news/2014/03/07/uob-kay-hian-malaysia-research-maintains-end-2014-klci-target-at-1900/
http://www.thesundaily.my/news/896489
https://sg.finance.yahoo.com/news/alliance-keeps-end-2014-klci-044004066.html
https://www.fundsupermart.com.my/main/research/-View-2014-Outlook-For-the-Malaysia-Equity-Market-4148
https://sg.finance.yahoo.com/news/strategy-affin-ib-research-raises-005006144.html

2015
http://klse-online.blogspot.com/2015/01/fbm-klci-likely-path-in-2015.html
http://www.theborneopost.com/2015/01/05/jf-apex-revises-year-end-target-fbm-klci-to-1720/
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=11&cad=rja&uact=8&ved=0ahUKEwicxLnrsqfRAhWEvo8KHQXwAn44ChC3AggYMAA&url=https%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv%3DH9NY-td9H-8&usg=AFQjCNHT0Xf26bfYhTCPo_wbqsCmrRvPWQ&sig2=Mcd_nbwj7gPbEJ_MGufA8A&bvm=bv.142059868,d.c2I
https://www.kenangainvestors.com.my/KIB/KIB.Application.Web/KIBFundsAdmin/images/Market%20Strategy%20-%201Q15%20Investment%20Strategy%20(Kenanga).pdf
http://www.takaful-malaysia.com.my/products/family/ILFundReports/ILP%20Annual%20Report%202014.pdf

2016
http://www.thesundaily.my/news/1692808
http://www.seaisi.org/News/4202/MIDF+Research+introduces+end-2016+target+for+KLCI+at+1800+points+
https://themalaysianinsider.wordpress.com/2015/12/15/cimb-research-raises-end-2016-klci-target-to-1900-points/
http://arecacapital.com/file/Tradewise-%20Replace%20exports(1).pdf
http://www.maybank2u.com.my/iwov-resources/investment-bank/document/my/en/newsroom/2016/Maybank%20Investment%20Bank%20Shares%20Investment%20Strategies%20For%201H2016.pdf

THIS IS A PERSONAL BLOG AND SHALL NOT BE RELIED IN WHATSOEVER MANNER BY ANYONE. ALL ARTICLES CONTAINED IN THIS SITE ARE FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY, COMPLETENESS AND TIMELINESS. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED IN THE ARTICLES

Author: Ken Utau

Data Scientist, Markets Analyst and Food Lover

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