Can earnings forecasts be improved by taking into account the forecast bias?

François Dossou, Sandrine Lardic () and Karine Michalon ()
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François Dossou: SINOPIA AM - Sinopia AM - Sinopia AM

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Abstract: The recent period has highlighted a well-known phenomenon, namely the existence of a positive bias in experts' anticipations. Literature on this subject underlines optimism in the financial analyst community. In this work, our significant contributions are twofold: we provide explanatory bias prediction models which will subsequently allow the calculation of earnings adjusted forecasts, for horizons from 1 to 24 months. We explain the bias using macroeconomic as well as sector and firm specific variables. We obtain some important results. In particular, the macroeconomic variables are statistically significant and their signs are coherent with the intuition. However, we conclude that the microeconomic variables are the main explanatory variables. From the forecast evaluation statistics viewpoints, the adjusted forecasts make it possible quasi-systematically to improve the forecasts of the analysts.

Keywords: Analysts; Forecasts; Bias; Adjusted; Earnings Bias (search for similar items in EconPapers)
Date: 2008-11-01
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00365972v1
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Published in Economics Bulletin, 2008, Vol. 7 (NO. 11), pp. 1-20

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Journal Article: Can earnings forecasts be improved by taking into account the forecast bias? (2008)
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