Rational expectations and security analysts' earnings forecasts
AbstractThis paper investigates the rationality of security analysts' forecasts. The forecasts of analysts participating in Lynch, Jones, and Ryan's "Institutional Brokers Estimate System" (I/B/E/S) data base are evaluated relative to past values of their own forecast errors, past values of forecasted earnings per share, and quarterly percentage changes in publicly available macroeconomic and financial time series. The publicly available series include the the consumer price index, unemployment rate, oil prices stock prices, gross national product, and corporate profits. The authors conduct a generalized orthogonality test and include only information available to analysts at the time the forecasts are made. The empirical results reject analyst forecast rationality, but not without exception. Copyright 1995 by MIT Press.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number 92-8.
Date of creation: 1992
Date of revision:
Other versions of this item:
- Ackert, Lucy F & Hunter, William C, 1995. "Rational Expectations and Security Analysts' Earnings Forecasts," The Financial Review, Eastern Finance Association, vol. 30(3), pages 427-43, August.
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- Lawrence, Michael & O'Connor, Marcus, 2000. "Sales forecasting updates: how good are they in practice?," International Journal of Forecasting, Elsevier, vol. 16(3), pages 369-382.
- Zwart, G.J. de & Dijk, D.J.C. van, 2008. "The Inefficient Use of Macroeconomic Information in Analysts' Earnings Forecasts in Emerging Markets," Research Paper ERS-2008-007-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
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