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Economics Bulletin Vol. 7, NO. 11 (2008) pp. 1-20

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

François Dossou 1, Sandrine Lardic 2, Karine Michalon 3

(2008-11-01)

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.

1 :	Sinopia AM (SINOPIA AM)
	Sinopia AM
2 :	EconomiX
	CNRS : UMR7166 – Université Paris X - Paris Ouest Nanterre La Défense
3 :	Dauphine Recherches en Management (DRM)
	CNRS : UMR7088 – Université Paris IX - Paris Dauphine

Équipe de recherche : DRM UMR7088 CNRS - Equipe du CEREG

Discipline

:

Humanities and Social Sciences/Business administration Humanities and Social Sciences/Economy and finances

Mots-Clés : Analysts – Forecasts – Bias – Adjusted – Earnings Bias

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Contributeur : Salem Tacine <>

Submitted on : Thursday, 5 March 2009 11:35:27

Updated on : Friday, 6 March 2009 10:28:03