How Equity is Reported and Analyzed?

Abstract

This paper investigates the market reaction to the information released in security analyst reports. It shows that the market reacts significantly and positively to changes in recommendation levels, earnings forecasts, and price targets. While changes in price targets and earnings forecasts both provide information to the market, revisions in price targets have a larger and more significant impact than comparable revisions in earnings forecasts. The text of the report is also a significant source of information as it provides the justifications supporting an analyst’s summary opinion. When all of this information is considered simultaneously, some of it, notably the earnings forecasts, is subsumed. The results further show that analysts correctly predict price targets slightly over 50% of the time. Finally, the valuation methodology used does not seem to be correlated with either the market’s reaction or the analyst’s accuracy

Companies must use the equity method to adjust the cost of acquisition of the investment for the investor's share of the investee's profit or loss after the investment date and for dividends received. The investor will increase the profit and carrying amount of the investment by his share of the profit in Equity is the owner's right to the assets of a company after deducting the total liabilities. Thus, the equity formula is an asset minus a liability or a liability. Simply put, the notion of equity is the amount of assets or assets that can be returned to the owner of the company if the company is liquidated and all debt obligations have been paid. Another meaning of equity is the investment invested by the owner in the company. This amount of equity can be reduced if the owner of the company makes a withdrawal of assets.