Adaptive Expectations, Time-Series Models, and Analyst Forecast Revision

12 Pages Posted: 23 May 2006

See all articles by Lawrence D. Brown

Lawrence D. Brown

Temple University - Department of Accounting

Michael S. Rozeff

SUNY at Buffalo - Department of Financial & Managerial Economics

Abstract

The process by which analysts revise quarterly earnings forecasts is analyzed and compared to the way in which several time-series models of quarterly earnings revise forecasts. A significant portion of the analyst's forecast revision is explained by the most recent one-quarter-ahead forecast error. Analyst revisions are adaptive in the same manner that single-period ahead model forecasts are adaptive. At longer horizons, the evidence is that analysts revise forecasts in the same way that autoregressive models of quarterly earnings revise and not as moving average models do.

Keywords: analyst forecasts, earnings, adaptive expectations, earnings forecast errors

JEL Classification: M41, G14, G29

Suggested Citation

Brown, Lawrence D. and Rozeff, Michael S., Adaptive Expectations, Time-Series Models, and Analyst Forecast Revision. Journal of Accounting Research, Vol. 17, No. 2, Autumn 1979. Available at SSRN: https://ssrn.com/abstract=903540

Lawrence D. Brown

Temple University - Department of Accounting ( email )

Philadelphia, PA 19122
United States

Michael S. Rozeff (Contact Author)

SUNY at Buffalo - Department of Financial & Managerial Economics ( email )

Buffalo, NY 14260
United States

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