Trends in analyst earnings forecast properties

Forecast dispersion, error, and optimism are computed using 120,022 quarterly observations from 1990 to 2001. Forecast dispersion, error, and optimism all decrease steadily over the sample period, with loss firms showing an especially striking decrease. By the end of the sample period, dispersion and error differences between profit and loss firms are relatively minor, optimism for loss firms is around an unbiased 50%, and pessimism dominates profit firms. Additionally, loss firm earnings appear more difficult to forecast. The reduction in dispersion, error, and optimism does not appear fully attributable to earnings management, earnings guidance, or earnings smoothing. The trends are consistent with increased litigation concerns.