The Superiority of Analyst Forecasts as Measures of Expectations: Evidence from Earnings

16 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

If both producers and consumers demand forecasts based solely on their forecasting ability, then the equilibrium employment of analysts, a higher cost factor than time series models, implies that analysts must produce better forecasts than time series models. Past studies of comparative earnings forecast accuracy have concluded otherwise. Using nonparametric statistics that provide proper yet powerful tests, we find that Box-Jenkins time series models consistently produce better forecasts than martingale and submartingale earnings models; but Value Line Investment Survey consistently makes significantly better earnings forecasts than the Box-Jenkins models.

Keywords: earnings forecasts, security analyst forecasts, Box-Jenkins models

JEL Classification: G10, G12, G14, C22, M41

Suggested Citation

Brown, Lawrence D. and Rozeff, Michael S., The Superiority of Analyst Forecasts as Measures of Expectations: Evidence from Earnings. Journal of Finance, Vol. 33, No. 1, March 1978. Available at SSRN: https://ssrn.com/abstract=903550

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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