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Professional Expectations: Accurary and Diagonosis of Errors

Published online by Cambridge University Press:  06 April 2009

Edwin J. Elton ,
Martin J. Gruber  and
Mustafa N. Gultekin
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Abstract

The purpose of this paper is to analyze the errors made by professional forecasters (analysts) in estimating earnings per share for a large number of firms over a number of years. We have demonstrated in a previous paper that consensus (average) estimates of earnings per share play a key role in share price determination. In this paper, we examine consensus estimates with respect to the following questions: (1) What is the size and pattern of analysts' errors? (2) What is the source of errors? (3) Are some firms more difficult to predict than others? (4) Is there an association between errors in forecasts and divergence of analysts' estimates?

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 19 , Issue 4 , December 1984 , pp. 351 - 363
Copyright
Copyright © School of Business Administration, University of Washington 1984

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