Analyst Earnings Estimate Revisions Momentum
factor.formula
Analyst Earnings Estimate Revisions Momentum Formula:
in:
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The total number of earnings forecast reports issued by analysts for a specific stock during the observation period. To ensure the robustness of the factor, the time window is usually limited (for example, within the past year), and the number of reports is required to reach a minimum threshold (for example, $N \geq 3$) to avoid distortion of the calculation results due to data sparsity. When $N$ is less than the threshold, the calculation result of the factor will be marked as missing value. In addition, the selection of reports should be based on the earnings forecast for the company's performance in the current year (or the next reporting period).
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During the review period, the number of analyst forecast reports whose predicted net profit values are lower than the latest analyst forecast net profit values. This indicator reflects the number of times analysts have been conservative in their earnings forecasts for the company over the past period of time.
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The number of analyst forecast reports during the period of investigation in which the net profit value predicted was higher than the latest analyst forecast net profit value. This indicator reflects the number of times analysts have been optimistic about the company's earnings forecast in the past period of time.
factor.explanation
The value range of this factor is [-1, 1].
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The closer the FOM value is to 1, it means that during the observation period, analysts' earnings forecasts generally experienced upward adjustments, indicating that the market is more optimistic about the company's future profitability, forming a strong upward momentum for earnings forecasts.
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The closer the FOM value is to -1, it means that during the observation period, analysts' earnings forecasts generally experienced downward adjustments, indicating that the market is more pessimistic about the company's future profitability, forming a strong downward momentum for earnings forecasts.
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The FOM value is close to 0, indicating that during the observation period, analysts' earnings forecasts were generally stable, with roughly the same number of upward and downward adjustments, indicating that the market's expectations for the company's earnings are neutral or divergent.
This factor can be used to construct stock selection strategies, for example, buying stocks with higher FOM values (positive momentum) or shorting stocks with lower FOM values (negative momentum). It should be noted that this factor is easily affected by market sentiment and short-term events. Therefore, in practical applications, it is usually necessary to combine other factors for comprehensive consideration.