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

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Date
2008
Link to item file
http://economicsbulletin.vanderbilt.edu/2008/volume7/EB-06G10031A.pdf
Dewey
Economie politique
Sujet
Earnings Bias; Forecasts; Firms
JEL code
E37; C53; G17; G24; L25
Journal issue
Economics Bulletin
Volume
7
Number
11
Publication date
08-2008
Article pages
1-20
Publisher
Vanderbilt University
URI
https://basepub.dauphine.fr/handle/123456789/514
Collections
  • DRM : Publications
Metadata
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Author
Lardic, Sandrine
Dossou, François
Michalon, Karine
Type
Article accepté pour publication ou publié
Abstract (EN)
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.

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