A Comparative Analysis of Earnings Forecasts in Europe

Posted: 7 Oct 1996

See all articles by John Capstaff

John Capstaff

University of Strathclyde - Strathclyde Business School

Krishna Paudyal

Independent

Bill Rees

University of Edinburgh - Accounting and Finance

Date Written: August 1996

Abstract

This paper examines the accuracy of European analysts' forecasts of corporate earnings. The analysis is based on a large sample of individual forecasts of annual earnings for years ending in 1987 to 1992. The bias and accuracy of the analysts' forecasts in each country are contrasted and the results show that forecasts of Dutch and, to a lesser extent, UK and German firms' earnings are relatively accurate, and that forecasts of Austrian and Scandinavian firms' earnings are particularly poor. An analysis of the full sample and selected country specific sub-samples provide results that are consistent with optimistic forecasting and over- reaction to recent information when making forecasts, that forecasts based on the firm's share price and the market wide price earnings ratio have incremental predictive value beyond that of the analysts' forecasts, and revisions of forecasts made by analysts show a systematic tendency to reduce previously forecasted changes.

JEL Classification: G29, M41

Suggested Citation

Capstaff, John and Paudyal, Krishna N. and Rees, William, A Comparative Analysis of Earnings Forecasts in Europe (August 1996). Available at SSRN: https://ssrn.com/abstract=2766

John Capstaff

University of Strathclyde - Strathclyde Business School ( email )

100 Cathedral Street
Glasgow G4 0LN
United Kingdom
0141 5483890 (Phone)
0141 5523547 (Fax)

Krishna N. Paudyal

Independent ( email )

William Rees (Contact Author)

University of Edinburgh - Accounting and Finance ( email )

29 Buccleuch Place
Edinburgh, EH8 9JS
United Kingdom
+44 131 651 5244 (Phone)

HOME PAGE: http://www.business-school.ed.ac.uk

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