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Dissertations

Improving earnings forecasts using intra-industry information transfer

Andrew Ayimbila Anabila, 2003
Faculty Advisor: Jacob Thomas

Abstract

This study examines whether forecasts for quarterly earnings per share (EPS) from analysts (obtained from IBES) and a time series model (seasonal random walk with drift) can be improved by using intra-industry information transfers (historic co-movement in the unexpected earnings of firms within an industry). After confirming that co-movement patterns are relatively persistent through time, I combine the historic co-movement between firm pairs with the forecast error of the firm that announces earlier to update the forecast for the firm that has not yet announced. I then measure the improvement in forecast accuracy of these updated forecasts, relative to the corresponding forecasts available just prior to the earlier announcer's earnings release, for both time-series and analysts' forecasts. Though I also examine the bias and accuracy of the available and updated forecasts, I focus primarily on precision (the inverse of the root mean square error from the regression of actual EPS on forecast EPS) when measuring performance. My results are as follows: (a) while I find unambiguous benefits to updating time series forecasts with information transfer, there is no obvious improvement when I update analyst forecasts with information transfers; (b) analysts appear to update their forecasts for firms after observing the unexpected earnings for earlier announcers; and (c) aggregating updated forecasts from different pairs containing that later announcer improves performance, especially for updated forecasts derived from analyst forecasts.

Doctoral Program News

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The August issue of Ideas at Work features research that doctoral candidate Colleen Honigsberg led in conjunction with Sharon Katz.

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Abbie Wazlawek's joint research with Professor Daniel Ames is featured in the June 24th, 2014 edition of Ideas at Work

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Ethan Rouen featured in Ideas at Work

Ethan Rouen's joint research with Professor Dan Amiram is featured in the May 15th, 2014 edition of Ideas at Work

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The PhD Program Congratulates John Yao

PhD student John Yao was a finalist in the 2013 M&SOM (Manufacturing & Service Operations Management) student paper competition.

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Honigsberg Named Postdoctoral Fellow

The PhD program is proud to congratulate Colleen Honigsberg, who was named the Postdoctoral Fellow in Corporate Governance at the Millstein Center at Columbia Law School in October 2013

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