Predictive ability of Value Line financial analysts' forecasts

Forecasting net income of firms has become a significant part of the services provided by most financial analysts. The predictive ability of financial analysts' forecasts obtained from Value Line Reports for 6 different industries over a 5-year period is investigated. The results from the analy...

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Published in:American business review 1994-01, Vol.12 (1), p.37
Main Authors: Yallapragada, RamMohan R, Rao, Spuma, Andrews, Donald R
Format: Article
Language:English
Subjects:
Accuracy
Earnings forecasting
Earnings per share
Economic models
Financial analysis
Stock prices
Studies
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Rao, Spuma
Andrews, Donald R
description Forecasting net income of firms has become a significant part of the services provided by most financial analysts. The predictive ability of financial analysts' forecasts obtained from Value Line Reports for 6 different industries over a 5-year period is investigated. The results from the analysis indicated that, for the sample firms, there was no significant difference between the financial analysts' forecasted annual income and the actual annual income. Significant differences were found in the relative predictive ability of Value Line analysts in the cases of the petroleum and communications industries. When actual earnings per share are included in the model, their relationship with the stock prices is shown to be significant at the alpha equals 0.01 level. However, when actual earnings per share, predicted earnings per share, and lagged earnings per share are included in the model, the relationship of actual earnings per share with the stock prices is not significant.
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ispartof American business review, 1994-01, Vol.12 (1), p.37
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language eng
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subjects Accuracy
Earnings forecasting
Earnings per share
Economic models
Financial analysis
Stock prices
Studies
title Predictive ability of Value Line financial analysts' forecasts
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