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Industry-level versus firm-level forecasts of long-term earnings growth

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  • Esplin, Adam

Abstract

This study assesses whether industry-level forecasts of long-term earnings growth (LTG) are more accurate than firm-level LTG forecasts commonly employed in prior work. I find that industry-level forecasts of LTG are more accurate than (i) firm-level forecasts, (ii) the median I/B/E/S consensus analyst LTG forecast, (iii) a zero growth forecast, and (iv) an LTG forecast combining industry and firm information. Industry-level forecasts are more accurate than firm-level forecasts for firms experiencing extreme growth and firms with high earnings variability, and are less accurate for firms in the Decline life-cycle stage.

Suggested Citation

  • Esplin, Adam, 2022. "Industry-level versus firm-level forecasts of long-term earnings growth," Finance Research Letters, Elsevier, vol. 47(PA).
    • Handle: RePEc:eee:finlet:v:47:y:2022:i:pa:s1544612321004852
    DOI: 10.1016/j.frl.2021.102516
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