Composite Earnings Forecasting Efficiency

John B. Guerard and Carl R. Beidleman
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John B. Guerard: O'Connor & Associates, 141 West Jackson Boulevard, Chicago, Illinois 60604
Carl R. Beidleman: Department of Finance, Lehigh University, Bethlehem, Pennsylvania 18015

Interfaces, 1987, vol. 17, issue 5, 103-113

Abstract: Composite earnings-per-share models were estimated for 35 chemical, food, and utility firms during the 1979--1980 period. It is generally held that financial analysts produce earnings forecasts superior to time series model forecasts; however, the results of this study indicate that the average mean square forecasting error of analyst forecasts may be reduced by combining analyst and univariate time-series model forecasts. Despite the high degree of correlation existing among analyst and time-series forecasts, the ordinary least-squares model estimation of the composite-earnings model is a better forecasting model than the composite-earnings models estimated with ridge regression techniques.

Keywords: finance:; portfolio (search for similar items in EconPapers)
Date: 1987
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