Geography, Diversity, and Accuracy of Crowdsourced Earnings Forecasts

61 Pages Posted: 18 Mar 2015 Last revised: 6 Oct 2016

See all articles by Biljana Adebambo

Biljana Adebambo

University of San Diego

Barbara A. Bliss

University of San Diego

Alok Kumar

University of Miami - School of Business Administration

Date Written: October 5, 2016

Abstract

Using a novel dataset containing the forecasts of both buy-side and sell-side analysts, and individual investors, we find that crowdsourced earnings forecasts are more accurate than expert forecasts of sell-side analysts. Examining the economic mechanisms that generate superior crowd forecasts, we find that the diversity of contributors and their geographical proximity to firm locations improve forecast accuracy. The crowdsourced consensus is a better measure of the market’s true earnings expectations as earnings surprise based on this consensus generates stronger market reactions. A trading strategy based on the difference between the two consensus estimates yields an abnormal 10-day return of 0.465-1.975%.

Keywords: Crowdsourcing, crowd diversity, local bias, analysts, earnings forecasts, forecast accuracy

JEL Classification: G14, G24

Suggested Citation

Adebambo, Biljana and Bliss, Barbara A. and Kumar, Alok, Geography, Diversity, and Accuracy of Crowdsourced Earnings Forecasts (October 5, 2016). Available at SSRN: https://ssrn.com/abstract=2579402 or http://dx.doi.org/10.2139/ssrn.2579402

Biljana Adebambo

University of San Diego ( email )

5998 Alcala Park
San Diego, CA 92110-2492
United States

Barbara A. Bliss (Contact Author)

University of San Diego ( email )

5998 Alcala Park
San Diego, CA 92110-2492
United States

Alok Kumar

University of Miami - School of Business Administration ( email )

514 Jenkins Building
Department of Finance
Coral Gables, FL 33124-6552
United States
305-284-1882 (Phone)

HOME PAGE: http://moya.bus.miami.edu/~akumar

Register to save articles to
your library

Register

Paper statistics

Downloads
177
rank
165,784
Abstract Views
1,724
PlumX Metrics