Industry-level versus firm-level forecasts of long-term earnings growth

Adam Esplin

Finance Research Letters, 2022, vol. 47, issue PA

Abstract: This study assesses whether industry-level forecasts of long-term earnings growth (LTG) are more accurate than firm-level LTG forecasts commonly employed in prior work. I find that industry-level forecasts of LTG are more accurate than (i) firm-level forecasts, (ii) the median I/B/E/S consensus analyst LTG forecast, (iii) a zero growth forecast, and (iv) an LTG forecast combining industry and firm information. Industry-level forecasts are more accurate than firm-level forecasts for firms experiencing extreme growth and firms with high earnings variability, and are less accurate for firms in the Decline life-cycle stage.

Keywords: Forecasting; Valuation; Long-term earnings growth (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:47:y:2022:i:pa:s1544612321004852

DOI: 10.1016/j.frl.2021.102516

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