Archival data of financial analysts' earnings forecasts in the euro zone: Problems with euro conversions

• Studies about financial analysts' forecast errors compare forecasted earnings with realized earnings or average “consensus” forecasts.
• The IBES database provides those forecasts, but I suspect a problem for euro-zone countries for the period before the birth of the euro.
• Forecasts are probably kept in national currencies (e.g. 10 “euros” are in fact 10 French Francs i.e. 1.50 euros).
• This can lead to a severe misevaluation of forecast errors.
• By comparing, different Stock Exchanges (1993–2011), I show that re-converting data leads to much more plausible forecast errors.

In multi-country studies, researchers frequently extract data in a single currency rather than in native currencies. This approach can be misleading for financial analysts’ forecasts in the euro zone when researchers are using the IBES database. We suspect that forecasts of earnings before the birth of the euro on January 1, 1999 are kept in national currencies, although they are supposed to be displayed in euros, which can severely distort results concerning earnings forecast accuracy. We propose a simple procedure for checking for the existence of this error, as well as a quick solution to overcome it.