Mardi | 2018-11-13
Salle des thèses 16h – 17h20

Andreea MORARU-ARFIRE – Michel DUBOIS – Zana GRIGALIūNIENE

This paper investigates the key determinants of analysts’ earnings forecast errors. We find that the firm-analyst relationship is at the core of the process of forecasting earnings. Specifically, we find that there is an unobserved, time-invariant component related to the firm-analyst dimension that explains much of the variance in the absolute forecast errors. This component is not yet captured by the existing observable characteristics identified in prior literature. We also show that forecast errors are stable over time, and analysts do not efficiently integrate past information into their forecasts. This study contributes to the existing literature by shedding light on the “black-box” process through which analysts forecast earnings.