A Theoretical Investigation into the Relative Accuracy of Management and Analyst Earnings Forecasts

Brett Trueman

University of California at Los Angeles, Anderson Graduate School of Management from Anderson Graduate School of Management, UCLA

Abstract: Over the past several years many researchers have empirically examined the issue of whether or not managerial earnings forecasts are more accurate than those prepared by security analysts. One result commonly found is that managerial forecasts which are released prior to analyst forecasts are at least as, if not more accurate than the posterior analyst forecasts. On the surface this seems paradoxical since analysts who release their forecasts after managerial forecast announcements are made have just as much, if not more, information with which to make a forecast than does the manager. The purpose of this paper is to provide one possible explanation for this paradox. As shown in the analysis here, analysts may be reluctant to revise their forecasts upon the receipt of new information because of the negative signal such a revision provides concerning the accuracy of their prior information. As a result, the amount of information held by analysts relative to that held by management will not be fully reflected in measures of forecast accuracy.

Date: 1986-06-01
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.escholarship.org/uc/item/0wg9c4m8.pdf;origin=repeccitec (application/pdf)

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: https://EconPapers.repec.org/RePEc:cdl:anderf:qt0wg9c4m8

Access Statistics for this paper

More papers in University of California at Los Angeles, Anderson Graduate School of Management from Anderson Graduate School of Management, UCLA Contact information at EDIRC.
Bibliographic data for series maintained by Lisa Schiff ().