Analysts Earnings Forecast Accuracy And Activity: A Time-Series Analysis

Abstract

We examine time-series variations in the accuracy of analysts’ earnings forecasts and analyst-specific factors that may explain these variations.  Our analysis shows that the accuracy of analysts’ annual earnings forecast accuracy has increased over our sample period (1984-2006).  In addition, forecasts have become more timely and frequent and analysts tend to issue forecasts for more consecutive years before being replaced.  We also find evidence that analysts issue forecasts for fewer companies per year and have a greater degree of industry-specific specialization.  Results of our analysis suggest that changes in analyst-specific characteristics have enhanced analysts’ ability to make accurate forecasts.