31 Pages Posted: 21 Nov 2003
Date Written: November 20, 2003
Abarbanell and Lehavy provide evidence that analysts' forecast errors are not normally distributed exhibiting a high occurrence of extreme negative forecast errors (left-tail asymmetry) and a high occurrence of small positive forecast errors (middle asymmetry). This is important for researchers who rely on techniques that are sensitive to the distributional assumptions of analysts' forecast errors. Many of the conclusions drawn by Abarbanell and Lehavy, however, are based on visual impressions (as opposed to formal empirical tests) or based on methods that are very sensitive to the empirical methods used (e.g., whether the serial correlation of forecast errors is caused by the left-tail asymmetry).
Keywords: Analysts' forecasts, analysts' bias, analysts' under/overreaction to information, analysts' loss function, discretionary accruals.
JEL Classification: G10, G29, M41, M43
Suggested Citation: Suggested Citation
Cohen, Daniel A. and Lys, Thomas Z., A Note on Analysts' Earnings Forecast Errors Distribution (November 20, 2003). JAE Boston Conference October 2002. Available at SSRN: https://ssrn.com/abstract=471322 or http://dx.doi.org/10.2139/ssrn.471322
By Ron Kasznik