Creating a Smarter Conditional Consensus Forecast

Financial Analysts Journal, Forthcoming

24 Pages Posted: 20 Nov 2007 Last revised: 1 Apr 2014

See all articles by Lawrence D. Brown

Lawrence D. Brown

Temple University - Department of Accounting

Gerald D. Gay

Georgia State University - Department of Finance

Marian Turac

Georgia State University

Date Written: May 19, 2008

Abstract

We examine analyst forecasts of 26 macroeconomic statistics over the August 1998 to March 2007 time period. We pose four research questions: (1) Does forecast accuracy persist?; (2) What are the determinants of such persistence?; (3) Do analysts who exhibit these characteristics make more accurate forecasts than the simple consensus?; and (4) Is a "smart" consensus based on individuals exhibiting these characteristics more accurate than the simple consensus? We show that analyst forecast accuracy persists and is determined by long-term, past accuracy and the overall ability in forecasting all statistics. That is, analyst long-term track record is more important than short-term track record, and track record in forecasting other statistics (general ability) is more important than track record in forecasting the macroeconomic statistic in question (specific ability). We demonstrate that a smart consensus conditioned on forecasts of analysts with superior long-term, general ability outperforms commonly reported mean and median consensus forecasts.

Keywords: Individual analyst forecasts, consensus forecasts, smart consensus, short-term and long-term track record, specific and general ability

JEL Classification: E27, E37, G29

Suggested Citation

Brown, Lawrence D. and Gay, Gerald D. and Turac, Marian, Creating a Smarter Conditional Consensus Forecast (May 19, 2008). Financial Analysts Journal, Forthcoming . Available at SSRN: https://ssrn.com/abstract=1031178 or http://dx.doi.org/10.2139/ssrn.1031178

Lawrence D. Brown (Contact Author)

Temple University - Department of Accounting ( email )

Philadelphia, PA 19122
United States

Gerald D. Gay

Georgia State University - Department of Finance ( email )

Robinson College of Business
Atlanta, GA 30303-3083
United States
404-413-7321 (Phone)
404-413-7312 (Fax)

Marian Turac

Georgia State University ( email )

RCB, Department of Finance
35 Broad St., Suite 1243
Atlanta, GA GA 30303
United States
(404) 413 7352 (Phone)
(404) 413 7312 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
326
Abstract Views
1,528
rank
92,040
PlumX Metrics