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StarMine awards rank analysts against their peers based on earnings calls and returns

StarMine measures the performance of analysts based on the returns of their buy and sell recommendations and the accuracy of their earnings estimates. The 2007 awards are based on the 2007 calendar-year performance of recommendations and estimates of companies that are based in Hong Kong and China.

The awards are based on the estimates and recommendations as recorded in the Thomson Financial I/B/E/S database.

StarMine uses the Global Industry Classification System for its industry definitions.

In some instances in Hong Kong and China, the GICS has resulted in industries that are not large enough for ranking purposes. When this has been the case, StarMine has combined multiple industries to reflect the way analysts organise their coverage.

Analysts are ranked according to their industry excess return, computed from a portfolio simulation that measures each analyst relative to an industry-based benchmark. All analyst returns are calculated relative to the return on a market-capitalisation-weighted portfolio of all the stocks in a given industry.

For comparison purposes, StarMine builds a non-leveraged portfolio for each analyst based on his or her recommendations. The result gives the analyst credit for the amount by which the stock outperformed the benchmark. The resulting portfolio is rebalanced each month and whenever the analyst adds coverage, drops coverage or changes a rating.

To qualify for a 2007 award, an analyst must have covered at least five stocks in a given industry throughout the year. If an industry has fewer than 15 stocks, an analyst must have covered a minimum of three stocks or 33 per cent of the stocks in the industry, whichever is greater.

Also, an analyst's industry return must have exceeded the return of the relevant industry benchmark.

Finally, the analyst must have delivered at least a three-star performance on his or her overall coverage as measured by StarMine's coverage-relative rating.

To qualify for the overall stock-picking awards, analysts must have covered at least five stocks. In addition, StarMine requires analysts to have earned at least a five-star rating on their overall coverage as measured by StarMine's coverage-relative rating. StarMine's proprietary measure, single-stock estimate score (SES), examines the accuracy of each analyst's earnings forecasts. SES is a measure of relative accuracy; that is, analysts are compared against their peers.

An analyst's SES can range from 0 to 100, with 50 representing the average analyst. To score higher than 50, an analyst must make estimates that are both significantly different from and more accurate than others' estimates.

To determine the winners of the industry earnings estimate awards, StarMine ranks qualifying analysts based on their industry estimate score for the stocks in a specific industry. The 2007 analyst awards for Hong Kong and China did not cover Lehman Brothers.

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