Analysts' Forecasts of Taiwanese Firms' Earnings: Some Empirical Evidence

This study examines the accuracy and bias associated with the analysts' earnings forecasts of Taiwanese firms. Using the forecast data of individual analysts over 1991–1997 from the I/B/E/S database, we find that analysts' forecasts of earnings are generally more accurate than the predicti...

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Bibliographic Details
Published in:Review of Pacific basin financial markets and policies 2004-12, Vol.7 (4), p.571-597
Main Authors: Ho, Li-Chin Jennifer, Tsay, Jeffrey
Format: Article
Language:English
Subjects:
Accuracy
Bias
Capital market
Earnings
Earnings forecasting
Empiricism
Enterprises
Finance
Forecasts
Studies
Taiwan
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Summary:This study examines the accuracy and bias associated with the analysts' earnings forecasts of Taiwanese firms. Using the forecast data of individual analysts over 1991–1997 from the I/B/E/S database, we find that analysts' forecasts of earnings are generally more accurate than the predictions of a naïve forecasting model. However, this superiority seems to be largely confined to shorter forecast horizons. We also find that the analysts' earnings forecasts of Taiwanese firms are optimistically biased and that the bias depends on the nature of the earnings news. In addition, analysts' forecasts appear to be more accurate for larger firms and the bias also decreases with firm size. We find some variation in forecast accuracy and bias across industries but the overall results are not driven by any specific time period.
ISSN:0219-0915
1793-6705
DOI:10.1142/S0219091504000238