Improvement in the Forecasting Ability of Analysts

27 Pages Posted: 15 Aug 2002

See all articles by Stephen John Ciccone

Stephen John Ciccone

University of New Hampshire - Department of Accounting & Finance

Abstract

Forecast dispersion, error, and optimism are computed using 36,448 annual observations and 120,022 quarterly observations from 1990 to 2001. Forecast dispersion, error, and optimism all decrease steadily over the sample period, with loss firms showing an especially striking decrease. By the end of the sample period, dispersion and error differences between profit and loss firms are relatively minor, optimism for loss firms is around an unbiased 50%, and pessimism dominates profit firms. The improvement does not appear fully attributable to earnings management, earnings guidance, or Street versus GAAP earnings differences. Furthermore, it appears that loss firm earnings are considerably more difficult to forecast. Given this greater difficulty, analysts actually provide more value when forecasting loss firm earnings.

Keywords: analysts, forecasts, earnings, dispersion, error, optimism

JEL Classification: G14, M40

Suggested Citation

Ciccone, Stephen J., Improvement in the Forecasting Ability of Analysts. Available at SSRN: https://ssrn.com/abstract=320163 or http://dx.doi.org/10.2139/ssrn.320163

Stephen J. Ciccone (Contact Author)

University of New Hampshire - Department of Accounting & Finance ( email )

Durham, NH 03824
United States
603-862-3343 (Phone)
603-862-3383 (Fax)

HOME PAGE: http://pubpages.unh.edu/~sciccone

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