Economics at your fingertips  

Predicting forecast errors through joint observation of earnings and revenue forecasts

Brian J. Henderson and Joseph M. Marks

Journal of Banking & Finance, 2013, vol. 37, issue 11, 4265-4277

Abstract: We propose a simple method to infer the forecast error associated with quarterly estimates of earnings and revenue before the firm announces realized earnings and revenue. The method uses estimates of the profit margin implied by an analyst’s forecasts of both earnings and revenue to identify forecasts that are likely to be optimistic or pessimistic. The ability to anticipate forecast error permits a trading strategy that exploits the average market reaction following positive and negative earnings and revenue surprises.

Keywords: Analyst forecast; Earnings announcement; Revenue announcement; Profit margin (search for similar items in EconPapers)
JEL-codes: G02 G14 G17 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2018-12-08
Handle: RePEc:eee:jbfina:v:37:y:2013:i:11:p:4265-4277