Hostname: page-component-cc8bf7c57-n7qbj Total loading time: 0 Render date: 2024-12-11T23:08:23.832Z Has data issue: false hasContentIssue false
  • English
  • Français

Professional Expectations: Accurary and Diagonosis of Errors

Published online by Cambridge University Press:  06 April 2009

Edwin J. Elton ,
Martin J. Gruber  and
Mustafa N. Gultekin
Get access Rights & Permissions [Opens in a new window]

Abstract

The purpose of this paper is to analyze the errors made by professional forecasters (analysts) in estimating earnings per share for a large number of firms over a number of years. We have demonstrated in a previous paper that consensus (average) estimates of earnings per share play a key role in share price determination. In this paper, we examine consensus estimates with respect to the following questions: (1) What is the size and pattern of analysts' errors? (2) What is the source of errors? (3) Are some firms more difficult to predict than others? (4) Is there an association between errors in forecasts and divergence of analysts' estimates?

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 19 , Issue 4 , December 1984 , pp. 351 - 363
Copyright
Copyright © School of Business Administration, University of Washington 1984

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

[1]Armstrong, J. “Relative Accuracy of Methods Used to Forecast Annual Earnings.” Working Paper, Wharton School, University of Pennsylvania (1982).Google Scholar
[2]Brown, L., and Rozeff, M.. “The Superiority of Analysts Forecasts as a Measure of Expectations: Evidence From Earnings.” The Journal of Finance, Vol. 33 (03 1978), pp. 1–16.CrossRefGoogle Scholar
[3]Cragg, J., and Malkiel, B.. “The Consensus and Accuracy of Some Predictions of the Growth of Corporate Earnings.” The Journal of Finance Vol. 23 (03 1968), pp. 67–84.Google Scholar
[4]Crichfield, T.; Dyckman, T.; and Lakonishok, J.. “An Evaluation of Security Analysts’ Forecasts.” The Accounting Review, Vol. 53 (07 1978), pp. 651–668.Google Scholar
[5]Elton, Edwin J., and Gruber, Martin J.. “Earnings Estimate and The Accuracy of Expectational Data.” Management Science, Vol. 19 (04 1972), pp. 409–424.CrossRefGoogle Scholar
[6]Elton, Edwin J.; Gruber, Martin J.; and Gultekin, Mustafa. “Earnings Expectations and Share Prices.” Management Science, Vol. 27 (09 1981), pp. 975–987.CrossRefGoogle Scholar
[7]Elton, Edwin J.; Gruber, Martin J.; and Koo, Suk Mo. “Expectational Data: The Effect of Quarterly Reports.” Working Paper, New York University.Google Scholar
[8]Mincer, J., and Zarnovitz, V.. “The Valuation of Economic Forecasts.” In Economic Forecasts and Expectations, Mincer, Jacob, ed., National Bureau of Economic Research (1969).Google Scholar
[9]Richard, R. “Analysts’ Performance and the Accuracy of Corporate Earnings Forecasts.” The Journal of Business, Vol. 49 (07 1976), pp. 350–357.CrossRefGoogle Scholar
[10]Theil, H. Applied Economic Forecasting. North–Holland Publishing Company (1966).Google Scholar
[11]Theil, H.Economic Forecasts and Policy. North–Holland Publishing Company (1958).Google Scholar