Journal of Portfolio Management vol:30 issue:4 pages:144-149
The article refers to forecast bias resulting from the systematic optimism of analysts and develops an earnings surprise forecasting rule. The prediction model considers large-capitalization stocks, earnings variability and visibility, systematic bias in consensus earnings projections, and data for 600 companies in the DJ European Stoxx Index. The study found that positive information coefficients produce surprise earnings when a long-short investment strategy is used. Time series data is given for 16 countries including Austria, Germany, Finland, Italy, and Portugal and 18 sectors such as retail, financials, construction, telecoms, and utilities. The earnings and market data is from the end of 1989 to the middle of 2003. Variables linked to forecast bias are mentioned.