Financial analysts' forecasts of earnings. A better surrogate for market expectations

Dov Fried, Dan Givoly

Research output: Contribution to journalArticle

257 Citations (Scopus)

Abstract

The specification of the market expectation of accounting numbers is a common feature of many empirical studies in accounting and finance. Givoly and Lakonishok (1979) found that financial analysts' forecasts have information content. This study evaluates the quality of analysts' forecasts as surrogates for the market expectation of earnings and compares it with that of prediction models commonly used in research. Results indicate that prediction errors of analysts are more closely associated with security price movements, suggesting that analysts' forecasts provide a better surrogate for market expectations than forecasts generated by time-series models. The study also identifies factors that might contribute to the performance of the financial analysts'forecasts. The broadness of the information set employed by analysts and, to a lesser extent, their reliance on information released after the end of the fiscal year appear to be important contributors to their performance.

Original languageEnglish (US)
Pages (from-to)85-107
Number of pages23
JournalJournal of Accounting and Economics
Volume4
Issue number2
DOIs
StatePublished - Jan 1 1982

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Financial analysts
Analysts' forecasts
Analysts
Common features
Prediction error
Factors
Finance
Time series models
Empirical study
Prediction model
Security price
Fiscal
Information content

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

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Financial analysts' forecasts of earnings. A better surrogate for market expectations. / Fried, Dov; Givoly, Dan.

In: Journal of Accounting and Economics, Vol. 4, No. 2, 01.01.1982, p. 85-107.

Research output: Contribution to journalArticle

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