The accuracy of analysts' forecasts of earnings per share

Barefield, Russell M.; Comiskey, Eugene E.

doi:10.1016/0148-2963(75)90025-9

Cited by 127 publications

(36 citation statements)

References 6 publications

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“…Thus, months À9 through +2 generally correspond to forecasts of annual earnings for the year in which we measure DXFIN. The systematic negative forecast errors for both issuers and repurchasers are consistent with the average optimism documented in prior research (see, e.g., Barefield and Comiskey, 1975). Contrasting issuers with repurchasers, the plot shows that in the period leading up to the external financing year, analysts are about as optimistic for issuers as for repurchasers.…”

Section: Article In Presssupporting

confidence: 80%

The relation between corporate financing activities, analysts’ forecasts and stock returns

Bradshaw

Richardson

Sloan

2006

Journal of Accounting and Economics

512

203

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Section: Article In Presssupporting

confidence: 80%

The relation between corporate financing activities, analysts’ forecasts and stock returns

Bradshaw

Richardson

Sloan

2006

Journal of Accounting and Economics

512

203

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“…It is observed for both large and small firms. On average, analysts' forecasts made at the beginning of the period overestimate earnings (see similar findings by Barefield and Comiskey, 1975;Brown, 1997;Richardson et al, 1999, among others). However as the end of the reporting period approaches, analysts' optimism (i.e., their overestimation of earnings) turns, as evidenced by the predominance of downward revisions in earnings estimates, into pessimism (i.e., underestimation of earnings).…”

Section: Introductionsupporting

confidence: 51%

The rewards to meeting or beating earnings expectations

Bartov

Givoly

Hayn

2002

Journal of Accounting and Economics

1,312

390

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This paper finds that firms that meet or beat current analysts' earnings expectations (MBE) enjoy a higher return over the quarter than firms with similar quarterly earnings forecast errors that fail to meet these expectations. Further, such a premium to MBE, although somewhat smaller, exists in the cases where MBE is likely to have been achieved through earnings or expectations management. The findings also indicate that the premium to MBE is a leading indicator of future performance. This premium and its predictive ability are only marginally affected by whether the MBE is genuine or the result of earnings or expectations management. r 2002 Elsevier Science B.V. All rights reserved.

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“…More specifically, analysts' forecasts tend to be optimistic (McDonald, 1973;Barefield and Comiskey, 1975;Fried and Givoly, 1982;O'Brien, 1988). For example.…”

Section: Introductionmentioning

confidence: 97%

Forecasts of earnings per share: Possible sources of analyst superiority and bias*

Affleck-Graves

Davis

Mendenhall

1990

Contemporary Accting Res

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Abstract, Previous research has shown that analysts' forecasts of quarterly eamings per share (EPS) are more accurate than those of accepted time-series models. In addition, some previous research suggests that, on average, analysts' forecasts tend to be optimistic (i.e., biased). Two explanations for analysts' superiority have been proposed: (1) analysts use more recent information than can time-series models and (2) analysts use forecastrelevant information not included in the time-series of past eamings. This paper provides evidence on a third potential source of analyst superiority: the possibility that humans can use past eamings data to predict future eamings more accurately than can mechanical time-series models. We find that human judges do no worse than accepted time-series models when both use the same information set: namely, the sedes of past EPS figures. To date, little or no research has attempted to determine why analyst bias might exist. Still, some possible reasons have been forwarded. First, pessimistic forecasts or reports may hinder future efforts of the analyst or the analyst's employer to obtain information from the company being analyzed. Second, forecast data bases may suffer a selection bias if analysts tend to stop following those firms that they perceive as performing poorly. This study proposes, and provides evidence regarding, a third possible explanation for analyst bias: the use of judgmental heuristics by analysts. Many studies have shown that human predictions are often biased because of the use of such heuristics. We present evidence that suggests this may be the case for analysts' forecasts of eamings per share.Resume, De precedents travaux de recherche ont demontre que les previsions des analystes relatives au benefice par action (BPA) trimestriel sont plus exactes que celles que permettent d'obtenir les modeles reconnus bases sur les series chronologiques. De plus, les resultats de certains travaux de recherche laissent croire qu'en moyenne, les previsions des analystes tendent a etre optimistes (c'est-a-dire biaisees). Deux explications a cette superiorite ont ete proposees: 1) I'information que les analystes utilisent est plus recente que celles utilisees dans les modeles fondes sur les series chronologiques et 2) les analystes utilisent de I'information pertinente aux previsions qui ne figure pas dans les series chronologiques relatives aux benefices passes. Les auteurs attribuent a un troisieme facteur potentiel cette superiorite: la possibilite pour les humains d'utiliser les donnees relatives aux benefices passes pour predire les benefices futurs de fa9on plus precise * IntroductionResearch has shown that tinancial analysts' forecasts of corporate eamings per share (EPS) are more accurate than those produced by time-series models (Brown and Rozeff, 1979;Fried and Givoly, 1982;Collins, Hopwood, and McKeown, 1984;Brown, Griffin, Hagerman, and Zmijewski, 1987a) but that analysts also tend to overestimate future eamings (Fried and Givoly, 1982;O'Brien, 1988). Prior explanat...

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The accuracy of analysts' forecasts of earnings per share

Cited by 127 publications

References 6 publications

The relation between corporate financing activities, analysts’ forecasts and stock returns

The relation between corporate financing activities, analysts’ forecasts and stock returns

The rewards to meeting or beating earnings expectations

Forecasts of earnings per share: Possible sources of analyst superiority and bias*

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