Identifying Consensus Analysts' Earnings Forecasts that Correctly and Incorrectly Predict an Earnings Increase

摘要: :  This study observes that consensus analysts’ forecasts incorrectly predict an increase in one-year-ahead earnings 28.9% of the firm-year observations, and correct (incorrect) firms generate 14.8% (−25.7%) abnormal returns over next year, on average. The ability to anticipate when predicted increases will or not materialize is therefore potentially important investors investment fund managers. paper develops empirical model predicts correctly (versus incorrectly) direction change upcoming earnings, by exploiting information (a) nature characteristics firms’ predictability, (b) fundamental analysis growth. successfully distinguishes between forecasted do not) a trading strategy takes long (short) positions portfolio identifies as more (less) likely generates average annual return 14.1%.