The Accounting Review Vol. 51 No. 2 1976
A Comparison of the Accuracy of Corporate and Security Analysts' Forecasts of Earnings.
Abstract
In this study, the question of forecast accuracy by examining forecasts released by firms during 1970 and 1971 is considered. Since these forecast releases were voluntary on the part of the firms involved, there is some question about the validity of drawing inferences regarding overall accuracy of mandatory forecasts; thus, some results are included which are merely descriptive, in addition to certain statistical tests addressed more to the issue of inference. A second aim of the study was to examine the accuracy of forecasts made by outsiders (security analysts) relative to the forecasts of firms. Ideally, one would expect corporations to be able to forecast their earnings more accurately than outsiders, even when those outsiders are professional analysts. In short, based on the empirical results, forecast accuracy does not appear to be highly impressive for either group. Given the potential disruptive effects of poor forecasting on investment decisions and, as a result, on current stock market mechanisms, perhaps it would be wise to declare a moratorium on pressures for mandatory published forecasts by firms until forecasting techniques have been refined sufficiently to assure considerably better accuracy than apparently exists.
- DOI
- 10.2308/tar-4491936
- Volume
- 51
- Issue
- 2
- Pages
- 244-254
- Language
- en
- Sources
- openalex crossref