Note on Adjustments to Analysts' Earnings Forecasts Based Upon Systematic Cross-Sectional Components of Prior-Period Errors

This study assesses the effectiveness of using systematic components of cross-sectional forecast errors from prior years in order to adjust current analysts' earnings forecasts. The empirical results document that a significant component of the cross-sectional MSE in analysts' forecasts is systematic, and that parameter estimates from earlier periods enable the elimination of a substantial portion of the systematic errors in current forecasts. Further improvements in forecast accuracy are attained by the incorporation of prior-year excess security returns in order to reduce unsystematic error.

• 저널Management Science · 41(8) · 1392–1396
• 토픽Monetary Policy and Economic Impact · General Economics, Econometrics and Finance
• DOI10.1287/mnsc.41.8.1392
• 저자Pieter T. Elgers, May H. Lo, Dennis Murray