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A Comparative Analysis of Earnings Forecasts in Europe

Author

Listed:
  • John Capstaff

    (University of Strathclyde,)

  • Krishna Paudyal
  • William Rees

Abstract

This study examines the accuracy and bias of financial analysts' EPS forecasts in nine European countries during 1987 to 1995. There are significant differences between the countries which may be due to the differences in earnings behaviour, accounting practices, and the influence of securities markets. An optimistic bias is endemic in European forecasts, consistent with research from the US. Investors who incorporate earnings forecasts in their stock selection procedures may be able to improve returns by explicitly adjusting their models for observed regularities in earnings forecast errors. However, we have shown that these regularities differ in incidence and magnitude across the countries studied, and further research is needed to effectively model these differences. Copyright Blackwell Publishers Ltd 2001.

Suggested Citation

  • John Capstaff & Krishna Paudyal & William Rees, 2001. "A Comparative Analysis of Earnings Forecasts in Europe," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 28(5-6), pages 531-562.
  • Handle: RePEc:bla:jbfnac:v:28:y:2001-06:i:5-6:p:531-562
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    Citations

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    Cited by:

    1. Galanti, Sébastien, 2016. "Archival data of financial analysts' earnings forecasts in the euro zone: Problems with euro conversions," Research in International Business and Finance, Elsevier, vol. 38(C), pages 466-473.
    2. Rochon, Mathieu & Desrosiers, Stéphanie & L’Her, Jean-François, 2004. "Révision à la baisse de la prime sur les actions au Canada," L'Actualité Economique, Société Canadienne de Science Economique, vol. 80(1), pages 137-170, Mars.
    3. repec:eco:journ1:2017-02-28 is not listed on IDEAS
    4. repec:hal:journl:dumas-00934606 is not listed on IDEAS
    5. Simon Hussain, 2006. "Security analysts and 'bad news’: a note on 9/11," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 2(4), pages 251-256, July.
    6. repec:ebl:ecbull:v:7:y:2008:i:11:p:1-20 is not listed on IDEAS
    7. repec:kap:rqfnac:v:50:y:2018:i:4:d:10.1007_s11156-017-0654-9 is not listed on IDEAS
    8. Attig, Najah & Guedhami, Omrane & Mishra, Dev, 2008. "Multiple large shareholders, control contests, and implied cost of equity," Journal of Corporate Finance, Elsevier, vol. 14(5), pages 721-737, December.
    9. Jáki, Erika, 2013. "A válság mint negatív információ és bizonytalansági tényező. A válság hatása az egy részvényre jutó nyereség-előrejelzésekre
      [The financial crisis as negative information and a factor of uncertaint
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1357-1369.
    10. Coën, Alain & Desfleurs, Aurélie, 2010. "La précision des analystes financiers en Europe : l’effet pays et l’effet secteur revisités," L'Actualité Economique, Société Canadienne de Science Economique, vol. 86(2), pages 133-162, juin.
    11. Coen, Alain & Desfleurs, Aurelie & L'Her, Jean-Francois & Suret, Jean-Marc, 2005. "Another look at factors explaining quality of financial analysts' forecasts: Evidence from the Asian emerging markets," Journal of Multinational Financial Management, Elsevier, vol. 15(4-5), pages 414-434, October.
    12. Breuer, Wolfgang & Gürtler, Marc, 2010. "Implied rates of return, the discount rate effect, and market risk premia," Working Papers IF33V3, Technische Universität Braunschweig, Institute of Finance.
    13. Kothari, S. P., 2001. "Capital markets research in accounting," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 105-231, September.
    14. Dodd, Olga & Louca, Christodoulos & Paudyal, Krishna, 2015. "The determinants of foreign trading volume of stocks listed in multiple markets," Journal of Economics and Business, Elsevier, vol. 79(C), pages 38-61.
    15. Sandrine LARDIC & Karine MICHALON & François DOSSOU, 2008. "Can earnings forecasts be improved by taking into account the forecast bias?," Economics Bulletin, AccessEcon, vol. 7(11), pages 1-20.
    16. Breuer, Wolfgang & Feilke, Franziska & Gürtler, Marc, 2007. "Analysts' dividend forecasts, portfolio selection, and market risk premia," Working Papers FW25V2, Technische Universität Braunschweig, Institute of Finance.
    17. Drobetz, Wolfgang & Grüninger, Matthias C. & Hirschvogl, Simone, 2010. "Information asymmetry and the value of cash," Journal of Banking & Finance, Elsevier, vol. 34(9), pages 2168-2184, September.
    18. Martin Wallmeier, 2005. "Analysts’ Earnings Forecasts for DAX100 Firms During the Stock Market Boom of the 1990s," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 19(2), pages 131-151, August.
    19. Karine Michalon & Sandrine Lardic & François Dossou, 2005. "Earnings forecast bias - a statistical analysis," Post-Print halshs-00142773, HAL.
    20. Bolliger, Guido, 2004. "The characteristics of individual analysts' forecasts in Europe," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2283-2309, September.

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