Three Sources of Earnings Forecasts
Date of Submission
Master of Science in Accounting
Call No. at the Univ. of New Haven Library
AS 36 .N29 Acc. 1994 no.2
(from Introduction, pp. 2-3) There are typically three sources from which annual earnings forecasts are produced: time series models (TS’s), financial analysts (FAF’s), and corporate managers (MF’s). As earnings forecasts are closely related to stock prices, an important issue for both accounting theory and practice is to assess the accuracy of all these forecasts.
As time series models involve a much smaller set of information than that used by financial analysts, one might expect time series forecasts to be less accurate than financial analysts forecasts. Yet some studies show that this may not be the case (e.g., Cragg and Malkiel  and Elton and Gruber ). Financial analysts’ forecasts have both social and private costs that exceed those of time series forecasts, so their usefulness is questionable if the results of these studies are universally confirmed. On the other hand, since corporate managers possess unique or inside knowledge that is possibly unavailable to outsiders, one might expect them to produce the most accurate forecasts. However, they also might publish biased forecasts in order to maximize their corporations’ and their personal interests. This study draws together the results of some research related to the accuracy and information content of the three sources of earnings forecasts.
Zong, Yining, "Three Sources of Earnings Forecasts" (1994). Master's Theses. 129.