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Intangible assets are changing investment

  • Forecasting profits is not as helpful as it used to be

WHEN you work as an equity analyst at an investment bank, your task is clear.

It is to comb all the statements made by corporate executives, to scour the industry trends and arrive at an accurate forecast of the company’s profits.

Achieve this and your clients will be happy and your bonus cheque will have many digits.

But is all this effort worthwhile?

Ax 1aNot as much as it used to be, according to Feng Gu and Baruch Lev, writing in a recent issue of Financial Analysts Journal*.

The authors imagined that investors could perfectly forecast the next quarter’s earnings for all companies.

They then assumed that investors bought all the…

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