The Inefficiency of the Mean Analyst Forecast as a Summary Forecast of Earnings

Oliver Kim, Steve C. Lim and Kenneth W. Shaw

Journal of Accounting Research, 2001, vol. 39, issue 2, 329-335

Abstract: We show analytically that mean analyst forecasts inefficiently aggregate information by assigning too much weight to analysts’ common information relative to their private information when used as a summary forecast measure of forthcoming earnings. A more precise summary forecast of earnings than the current mean forecast is the current mean forecast plus a positive multiple of the change in the mean forecast.

Date: 2001
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