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) |
|---|---|
| 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 |
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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 journal › Article
}
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
AN - SCOPUS:11944266625
VL - 21
SP - 185
EP - 198
JO - International Journal of Forecasting
JF - International Journal of Forecasting
SN - 0169-2070
IS - 1
ER -