Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
958217 | Journal of Economics and Business | 2009 | 19 Pages |
We analyze earnings forecasting errors made by financial analysts for 18 developed countries over the 1990–2006 period. We use the Heston–Rouwenhorst approach to unravel country-, industry-, and firm-specific effects as a source of variation in financial analysts’ earnings forecast errors. We first estimate each effect with a dummy variable regression, and then decompose the variance of forecast errors into different effects. We provide evidence that the differences between countries, industrial sectors, and analyst-following offer a weak explanation for differences in forecast errors. Country effects however largely dominate industry and analyst-following effects. By contrast, the type of earnings (profits or losses)—and variations in earnings (increases or decreases) play a significant role in the forecast accuracy of financial analysts.