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Accuracy of consensus expectations for top-down earnings per share forecasts for two S&P indexes

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  • Richard Chung
  • Lawrence Kryzanowski

Abstract

In this paper, we examine the top-down forecast accuracy and divergence of market strategists for quarterly Earnings Per Share (EPS) forecasts for the S&P400 and S&P500 Indexes using the I/B/E/S summary database. We find that such forecasts are, on average, optimistically biased, and that the bias increases with an increase in the number of reporting market strategists and the coefficient of variation of such forecasts. We find that our nondirectional measure of forecast accuracy indicates that accuracy deteriorates with increasing default and term premia (two priced APT factors). Our findings have implications for the asset allocation decisions and markettiming practices of professional fund managers.

Suggested Citation

  • Richard Chung & Lawrence Kryzanowski, 1999. "Accuracy of consensus expectations for top-down earnings per share forecasts for two S&P indexes," Applied Financial Economics, Taylor & Francis Journals, vol. 9(3), pages 233-238.
    • Handle: RePEc:taf:apfiec:v:9:y:1999:i:3:p:233-238
    DOI: 10.1080/096031099332302
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    Cited by:

    1. Konchitchki, Yaniv & Patatoukas, Panos N., 2014. "Accounting earnings and gross domestic product," Journal of Accounting and Economics, Elsevier, vol. 57(1), pages 76-88.
    2. Chung, Richard & Kryzanowski, Lawrence, 2000. "Market timing using strategists' and analysts' forecasts of S&P 500 earnings per share," Financial Services Review, Elsevier, vol. 9(2), pages 125-144, 00.
    3. Jordi Pons-Novell, 2003. "Strategic bias, herding behaviour and economic forecasts," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 22(1), pages 67-77.

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