Abstract
This paper compares Value Line and Institutional Brokers Estimate System (I/B/E/S) analysts' earnings forecasts. Comparing the accuracy of forecasts of a single forecaster (Value Line) to consensus forecasts (I/B/E/S) offers a powerful test of the aggregation principle. Philbrick and Ricks [J. Acc. Res. 29 (1991) 397] conducted a similar study, but found no evidence that aggregation matters. Using more recent data, we reach different conclusions, finding that I/B/E/S earnings forecasts outperform Value Line significantly in terms of accuracy and as proxies for market expectations. I/B/E/S forecasting superiority is largely explained by its timing advantage and the aggregation principle. However, when we build an I/B/E/S consensus using forecasts from the I/B/E/S detail files of individual analyst forecasts, we find that some of its forecasting superiority remains after controlling for these advantages.
Original language | English (US) |
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Pages (from-to) | 185-198 |
Number of pages | 14 |
Journal | International Journal of Forecasting |
Volume | 21 |
Issue number | 1 |
DOIs | |
State | Published - Jan 1 2005 |
Externally published | Yes |
Keywords
- Combining forecasts
- Earnings forecasting
- Evaluating forecasts
- Financial analysts
- Rationality
- Timely composites
ASJC Scopus subject areas
- Business and International Management