Do current-year forecasts deserve investors' exclusive attention among analyst estimates?

Cheng tsu Huang, Chu hsuan Chang, Hsiou wei Lin

Research output: Contribution to journalArticlepeer-review

Abstract

This study demonstrates that in using security forecasts for equity valuation, it would be preferable to take into consideration of analyst multi-year forecasts instead of exclusively employing current-year earnings forecast because the latter forecast measure most typically incorporates non-recurring and/or value-irrelevant components of accounting earnings. In contrast, the same analyst's concurrent long-term earnings estimates appear to be free from the influence of the non-recurring earnings items. Namely, when a firm's long-run profitability differs from current year earnings, long-horizoned analyst forecasts add to identify the differences.

Original languageEnglish
Pages (from-to)714-723
Number of pages10
JournalInternational Review of Finance
Volume21
Issue number2
DOIs
StatePublished - Jun 2021

Keywords

  • analysts
  • discretionary accruals
  • earnings forecasts
  • non-recurring earnings

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