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A Positive Model of Earnings Forecasts: Top Down versus Bottom Up

  • Masako N. Darrough

    (Baruch College, CUNY)

Registered author(s):

    This 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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    File URL: http://www.journals.uchicago.edu/cgi-bin/resolve?JB750105
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    Article provided by University of Chicago Press in its journal Journal of Business.

    Volume (Year): 75 (2002)
    Issue (Month): 1 (January)
    Pages: 127-152

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    Handle: RePEc:ucp:jnlbus:v:75:y:2002:i:1:p:127-152
    Contact details of provider: Web page: http://www.journals.uchicago.edu/JB/

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