Analysts’Optimism and Selection Bias
This paper is an empirical examination, drawing on the Institutional Brokers Estimate System (I/B/E/S) database, of analysts’ earnings forecast optimism for Brazilian companies. The study found that analysts were optimistic on average and performed poorly in terms of precision and accuracy. The study period was January 1995 to December 2002. The forecasting errors in one period were correlated with the errors of the following period. There was evidence of persistent consensus errors among analysts, with those who were persistently optimistic outweighing those who were persistently pessimistic. A possible explanation for this predominant overoptimism is selection bias. In order to adjust analysts’ consensus forecasts, an optimization methodology is suggested, providing results that minimize the optimism bias. The evidence presented is relevant, especially for those using analysts’ earnings forecasts as an input in their stock valuation models.
Volume (Year): 4 (2007)
Issue (Month): 2 (May)
|Contact details of provider:|| Postal: |
Phone: +55 27 4009-4423
Fax: +55 27 4009-4422
Web page: http://www.bbronline.com.br/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:bbz:fcpbbr:v:4:y:2007:i:2:p:103-113. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sarah Lasso)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.