A Positive Model of Earnings Forecasts: Top Down versus Bottom Up
AbstractThis article analyzes the behavior of two groups of corporate earnings forecasters: analysts, who follow individual company fortunes, and market strategists, who predict earnings for various company aggregates. Using data for two market indices, the S&P 500 and the Dow Jones Industrial Average, we document that bottom-up forecasts are systematically more optimistic than top-down forecasts made by strategists. This difference is not driven by the difference in the forecast target. This finding may be explained by the incentives that analysts face and/or by cognitive bias.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Business.
Volume (Year): 75 (2002)
Issue (Month): 1 (January)
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Web page: http://www.journals.uchicago.edu/JB/
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