Value Line and I/B/E/S Earnings Forecasts

34 Pages Posted: 12 Dec 2001

See all articles by Sundaresh Ramnath

Sundaresh Ramnath

University of Miami - Department of Accounting

Steve Rock

University of Colorado at Boulder - Department of Accounting

Philip B. Shane

College of William & Mary; Monash University; Monash University - Department of Accounting

Date Written: November 8, 2001

Abstract

This paper compares Value Line and I/B/E/S analyst earnings forecasts in terms of accuracy, rationality, and as proxies for market expectations. Using more recent data and forming consensus forecasts from the I/B/E/S detail files, we reach different conclusions than Philbrick and Ricks [1991], who found that Value Line provided more reliable actual EPS data, but forecasts from the two databases were of similar quality. We find that I/B/E/S actual quarterly EPS data are no longer less reliable than Value Line EPS data, and I/B/E/S quarterly earnings forecasts significantly outperform Value Line in terms of accuracy and as proxies for market expectations. We find that I/B/E/S forecasting superiority can be explained by the combination of I/B/E/S's timing advantage and the mitigation of idiosyncratic error through consensus building. We also evaluate long-term forecasts from both databases and find that I/B/E/S forecasts are less biased and more accurate. Our results have implications for research evaluating the information content of quarterly earnings announcements, research using long-term forecasts in valuation models, and research seeking to generalize evidence regarding Value Line analysts' forecasting behavior.

Keywords: Financial analysts' earnings forecasts, Value Line, I/B/E/S, Market earnings expectations, Forecasting databases

JEL Classification: D84, G12, G14, G24, G29, M41

Suggested Citation

Ramnath, Sundaresh and Rock, Steven Karl and Shane, Philip B., Value Line and I/B/E/S Earnings Forecasts (November 8, 2001). Available at SSRN: https://ssrn.com/abstract=293389 or http://dx.doi.org/10.2139/ssrn.293389

Sundaresh Ramnath

University of Miami - Department of Accounting ( email )

Coral Gables, FL 33146-6531
United States
305-284-6668 (Phone)

Steven Karl Rock

University of Colorado at Boulder - Department of Accounting ( email )

419 UCB
Boulder, CO 80309-0419
United States
303-735-5009 (Phone)
303-492-5962 (Fax)

Philip B. Shane (Contact Author)

College of William & Mary ( email )

P.O. Box 8795
Williamsburg, VA 23185
United States

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

Monash University - Department of Accounting ( email )

H3.43, Building H, Level 3
Monash University Caulfiled
Melbourne, VIC 3145
Australia

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