Value Line and I/B/E/S earnings forecasts

Sundaresh Ramnath, Steve Rock, Philip Shane

Research output: Contribution to journalArticle

22 Citations (Scopus)

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 languageEnglish (US)
Pages (from-to)185-198
Number of pages14
JournalInternational Journal of Forecasting
Volume21
Issue number1
DOIs
StatePublished - Jan 1 2005
Externally publishedYes

Fingerprint

Earnings forecasts
Analysts' forecasts
Analysts' earnings forecasts
Broker

Keywords

  • Combining forecasts
  • Earnings forecasting
  • Evaluating forecasts
  • Financial analysts
  • Rationality
  • Timely composites

ASJC Scopus subject areas

  • Business and International Management

Cite this

Value Line and I/B/E/S earnings forecasts. / Ramnath, Sundaresh; Rock, Steve; Shane, Philip.

In: International Journal of Forecasting, Vol. 21, No. 1, 01.01.2005, p. 185-198.

Research output: Contribution to journalArticle

Ramnath, Sundaresh ; Rock, Steve ; Shane, Philip. / Value Line and I/B/E/S earnings forecasts. In: International Journal of Forecasting. 2005 ; Vol. 21, No. 1. pp. 185-198.
@article{904a34f704ec47219fa7f338e32b20a8,
title = "Value Line and I/B/E/S earnings forecasts",
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.",
keywords = "Combining forecasts, Earnings forecasting, Evaluating forecasts, Financial analysts, Rationality, Timely composites",
author = "Sundaresh Ramnath and Steve Rock and Philip Shane",
year = "2005",
month = "1",
day = "1",
doi = "10.1016/j.ijforecast.2004.02.002",
language = "English (US)",
volume = "21",
pages = "185--198",
journal = "International Journal of Forecasting",
issn = "0169-2070",
publisher = "Elsevier",
number = "1",

}

TY - JOUR

T1 - Value Line and I/B/E/S earnings forecasts

AU - Ramnath, Sundaresh

AU - Rock, Steve

AU - Shane, Philip

PY - 2005/1/1

Y1 - 2005/1/1

N2 - 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.

AB - 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.

KW - Combining forecasts

KW - Earnings forecasting

KW - Evaluating forecasts

KW - Financial analysts

KW - Rationality

KW - Timely composites

UR - http://www.scopus.com/inward/record.url?scp=11944266625&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=11944266625&partnerID=8YFLogxK

U2 - 10.1016/j.ijforecast.2004.02.002

DO - 10.1016/j.ijforecast.2004.02.002

M3 - Article

VL - 21

SP - 185

EP - 198

JO - International Journal of Forecasting

JF - International Journal of Forecasting

SN - 0169-2070

IS - 1

ER -