The relative forecast accuracy of UK brokers

John Capstaff; Krishna Paudyal; William Rees

doi:10.1080/00014788.1999.9728920

The relative forecast accuracy of UK brokers

John Capstaff^*, Krishna Paudyal, William Rees

^*Corresponding author for this work

Accounting And Finance

Research output: Contribution to journal › Article › peer-review

21 Citations (Scopus)

Abstract

In this study we examine whether there are differences in the accuracy of forecasts produced by brokers for a sample of almost 300,000 forecasts of the earnings per share of UK firms, over a period which spans accounting year ends from 1987-95. We report evidence of differential forecast accuracy which is contrary to much of the existing US research, in particular O'Brien (1985 and 1990). We use a forecast error that is controlled for the size of the firm being forecast, the industry to which the firm belongs, the accounting year being forecast, and the forecast horizon. There is evidence of short term persistence in the relative performance of the brokers across the full sample, and for some brokers there is evidence of forecast superiority over an extended period. We also find evidence that the relative accuracy of brokers differs between industries, which suggests that brokers tend to develop expertise in particular sectors. There are significant differences between brokers' accuracy in seven of the 11 industries in the sample, and in some industries there is evidence of persistently superior performance. Overall, these findings have implications for the construction of the earnings expectations proxies that are used in capital market research.

Original language	English
Pages (from-to)	3-16
Number of pages	14
Journal	Accounting and Business Research
Volume	30
Issue number	1
DOIs	https://doi.org/10.1080/00014788.1999.9728920
Publication status	Published - 1 Jan 1999

Funding

* The authors are, respectively, at the University of Strath-Clyde, Glasgow Caledonian University, and the University of Glasgow. They are grateful for the support provided by the Research Board of the ICAEW, and acknowledge the contribution of IlBlElS Inc for providing earnings per share forecast data, available through the Institutional Brokers Estimate System. This data has been provided as part of a broad-based academic programme to encourage earnings expectations research. Correspondence should be addressed to John Capstaff, Department of Accounting and Finance, University of Strath-Clyde, 100 Cathedral Street, Glasgow, G4 OLN. Tel. 0141 548 3890 Fax. 0141 552 3547 E-mail: [email protected] The final version of this paper was accepted in May 1999.

Keywords

forecast accuracy
brokers
expertise

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10.1080/00014788.1999.9728920

Cite this

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The relative forecast accuracy of UK brokers

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Keywords

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