A re-examination of analysts' superiority over time-series forecasts of annual earnings

• 成果类型: Article
• 署名作者: Bradshaw, Mark T.; Drake, Michael S.; Myers, James N.; Myers, Linda A.
• 署名单位: University of Arkansas System; University of Arkansas Fayetteville; Brigham Young University; Boston College
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-012-9185-8
• 发表日期: 2012
• 页码: 944-968
• 关键词: information-content; Financial analysts; expected rate; components; return; expectations; transitory; INVESTMENT; valuation; GROWTH

摘要

We re-examine the widely held belief that analysts' earnings per share (EPS) forecasts are superior to random walk (RW) time-series forecasts. We investigate whether analysts' annual EPS forecasts are superior, and if so, under what conditions. Simple RW EPS forecasts are more accurate than analysts' forecasts over longer horizons, for smaller or younger firms, and when analysts forecast negative or large changes in EPS. We also compare the accuracy of a third forecast of longer-term earnings based on a na < ve extrapolation of analysts' 1-year-ahead forecasts. Surprisingly, this na < ve extrapolation provides the most accurate estimate of long-term (2- and 3-year-ahead) earnings. These findings recharacterize prior generalizations about the superiority of analysts' forecasts and suggest that they are incomplete, misleading, or both. Moreover, in certain settings, researchers can rely on forecasts other than these explicit forecasts.