Analysts' Forecasts as Earnings Expectations

By P. O'Brien. 2011

393 citations recorded by the source corpus.

Abstract I examine three composite analyst forecast of earnings per share as proxies for expected earnings. The most current forecast weakly dominates the mean and median forecasts in accuracy. This is evidence that forecast dates are more relevant for determining accuracy than individual error. Consistent with previous research, I find analysts more accurate than time-series models. However prior knowledge of forecast errors from a quarterly autoregressive model predicts excess stock returns better than prior knowledge of analysts' errors. This is inconsistent with previous research, and is anomalous given analysts' greater accuracy.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/0926d397376aa9bd72b4481791e0bbcfd8e062e2

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Citations in the corpus

• Are analysts’ earnings forecasts more accurate when accompanied by cash flow forecasts? (2009, methodology): “We control for the age of the earnings forecast (MAGE) as prior papers find forecast age is negatively associated with forecast accuracy (Brown et al. 1987; O’Brien 1988; Clement 1999).”
• Analyst following along the supply chain (2011, neutral): “In particular, Olsen and Dietrich (1985) find that the monthly sales announcements of retailers affect the stock prices of their suppliers.”
• Political contributions and analyst behavior (2015, neutral): “The sample begins in 1993 because prior studies suggest that the earnings forecast announcement dates before 1993 are unreliable, as there are significant lags depending on the arrival time of the monthly forecasts in batches (O’Brien 1988; Zitzewitz 2001).”
• Analysts’ Forecasts: What Do We Know after Decades of Work? (2011, neutral): “O’Brien (1988): Even though Standard & Poors and I/B/E/S analysts exhibit higher forecast accuracy, they have no stronger association with stock returns than time series models.”
• Inside the 'Black Box' of Sell-Side Financial Analysts (2014, neutral): “2 Much of the early accounting research on analysts focused on building better expectations models or the statistical properties of earnings forecasts (Brown, 1993; Fried and Givoly, 1982; Lys and Sohn, 1990; O’Brien, 1988).”
• The Benefits of Financial Statement Comparability (2011, neutral): “, O’Brien [1988], Richardson et al.”
• The Implied Cost of Capital: A New Approach (2012, neutral): “Previous studies on earnings forecasting (e.g., Freeman, Ohlson, and Penman, 1982; O’Brien, 1988; Allee, 2008) tend to use separate time series regressions fit to individual firms with long earnings histories.”