A Contextual Evaluation of Composite Forecasts of Earnings

• In Event: Research with Analysts Forecasts

Abstract

This study addresses the impact of firm- and time-specific attributes on the accuracy of composite earnings forecasts. Separate evaluations are provided for smaller and larger firms, under the premise that firm size is associated with the quality of firms’ information environments. Results are also developed separately for time periods pre-dating and following the implementation of Regulation Fair Disclosure. We find that the relative accuracy of the composite forecasts is time-specific. Moreover, the improved accuracy of composite forecasts is significantly higher for the smaller firms. Collectively, these results suggest that contextual factors do matter when evaluating the usefulness of composite forecasts.

Authors

• Pieter Elgers, University of Massachusetts Amherst

• May Lo, Western New England University

• Wenjuan Xie, University of New Hampshire

• Le Emily Xu, University of New Hampshire