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How useful are forecasts of corporate profits?

Author

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  • Dean Croushore

Abstract

If forecasters predict higher earnings for corporations, the stock market will rise. Stock prices will drop with a forecast of lower earnings. But are such forecasts on the money? Dean Croushore uses data from the Survey of Professional Forecasters to check the accuracy of forecasts of corporate profits. The results show that, despite the volatility of corporate profits, the forecasts are rational

Suggested Citation

  • Dean Croushore, 1999. "How useful are forecasts of corporate profits?," Business Review, Federal Reserve Bank of Philadelphia, issue Sep, pages 3-12.
    • Handle: RePEc:fip:fedpbr:y:1999:i:sep:p:3-12
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    File URL: https://www.philadelphiafed.org/-/media/frbp/assets/economy/articles/business-review/1999/september-october/brso99dc.pdf
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    References listed on IDEAS

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    1. John H. Cochrane, 1997. "Where is the market going? Uncertain facts and novel theories," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 21(Nov), pages 3-37.
    2. John B. Carlson & Kevin H. Sargent, 1997. "The recent ascent of stock prices: can it be explained by earnings growth or other fundamentals?," Economic Review, Federal Reserve Bank of Cleveland, issue Q II, pages 2-12.
    3. Croushore, Dean & Stark, Tom, 2001. "A real-time data set for macroeconomists," Journal of Econometrics, Elsevier, vol. 105(1), pages 111-130, November.
    4. Francis X. Diebold & Jose A. Lopez, 1995. "Forecast evaluation and combination," Research Paper 9525, Federal Reserve Bank of New York.
    5. Dean Croushore, 1993. "Introducing: the survey of professional forecasters," Business Review, Federal Reserve Bank of Philadelphia, issue Nov, pages 3-15.
    6. Dean Croushore, 1996. "Inflation forecasts: how good are they?," Business Review, Federal Reserve Bank of Philadelphia, issue May, pages 15-25.
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    Cited by:

    1. Baghestani, Hamid & Khallaf, Ashraf, 2012. "Predictions of growth in U.S. corporate profits: Asymmetric vs. symmetric loss," International Review of Economics & Finance, Elsevier, vol. 22(1), pages 222-229.

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    Keywords

    Forecasting; Corporations;

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