Dear Colleagues and Students,

Faculty of Business Administration (FBA) will host the “UM Distinguished Visiting Scholar Seminar” on 17/04/2024 (Wednesday) and is pleased to invite Prof. Allaudeen HAMEED as the speaker.

Title: Long-Term Earnings Forecasts, Sentiment Manipulation and Stock Returns
Speaker: Prof. Allaudeen HAMEED, Tang Peng Yeu Professor in Finance, National University of Singapore (NUS), Singapore

Date: Wednesday, 17 April 2024
Time: 10:00 am
Venue: E22-G015
Language: English

Abstract:

We document that the negative relation between long-term expected earnings growth (LTG) and future stock returns is amplified by managerial manipulation of earnings. We isolate the price effects of manipulation from biased investor extrapolation of LTG using the inter-segment distortion of earnings in conglomerates. The underperformance in high LTG conglomerates is particularly pronounced in firms that manipulate segment earnings, with an annual alpha of -10% for high-minus-low LTG firms. This predictive effect accentuates under conditions of high shorting constraints or positive investor sentiment. Difference-in-difference analyses, leveraging SFAS 131 disclosure requirements, reveal analysts’ forecasts of LTG are unaffected by segment-level profit distortions in conglomerates, distinguishing overpricing due to managerial manipulation from over-extrapolation of LTG. Consistent with the sentiment effects, mutual funds increase their active holdings in these manipulated conglomerates and experience subsequent long-term underperformance.

Speaker’s Bio:

Prof. Allaudeen Hameed is Tang Peng Yeu Professor in Finance at the National University of Singapore (NUS) Business School. He served as the Head of Finance Department at NUS for many years. Hameed has also held visiting positions at the Chinese University of Hong Kong, University of North Carolina at Chapel Hill and the University of Texas at Austin. Prof. Hameed`s research interests include return-based trading strategies, stock return co-movement, liquidity, role of financial analysts and international financial markets. His research work has been published in top finance journals such as The Journal of Finance, Journal of Financial Economics, The Review of Financial Studies, The Journal of Financial and Quantitative Analysis, Review of Finance, and Management Science. He is Associate Editor of the Journal of Financial and Quantitative Analysis and Senior Fellow of Asian Bureau of Finance and Economic Research (ABFER). He also served on editorial boards of several other academic journals including: Financial Management (Associate Editor), International Review of Finance (Editor), Pacific-Basin Finance Journal (Associate Editor), Journal of Applied Finance (Associate Editor), and Asian-Pacific Journal of Financial Studies.

Best Regards,
Faculty of Business Administration