Analyst consensus estimate of return on equity
factor.formula
The calculation method of consensus expected ROE is usually the weighted average of the forecast values of various institutions. Common weighting methods include:
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Directly taking the arithmetic mean of the ROE forecast values of all institutions is the simplest weighting method, but it may not fully consider the forecasting capabilities of different institutions.
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On the basis of arithmetic mean, the historical forecast accuracy of different institutions and the time of forecast report release are taken into consideration. For example, institutions with recent release time and higher historical forecast accuracy are given higher weights to improve the accuracy and timeliness of consensus expectations.
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The weight is determined based on the accuracy of each institution's historical forecasts (e.g., the inverse of the forecast deviation). The higher the forecast accuracy of an institution, the higher the weight of its forecast value in the consensus expectation.
factor.explanation
Consensus ROE is a consensus expectation of the market on the future profitability of listed companies. Compared with ROE calculated using historical financial data, it better reflects investors' expectations of the company's future profitability. This indicator integrates the forecast data of multiple research institutions, eliminates the possible deviations in the forecast of a single institution, and provides a more robust and reference-worthy profitability assessment. A high consensus ROE usually means that the market expects the company to have strong profitability in the future and be more attractive to investors. This factor can be used as an important part of value investment stock selection, growth stock screening, and the construction of multi-factor quantitative models.