A Global Perspective of Analysts' Earnings Forecasts

Abstract

Most of the studies that have evaluated the earnings forecasts of analysts have limited their investigation to the US market. This paper extends the analysis to 21 countries included in the MSCI World universe as of June 1998. This study shows that across the vast majority of countries evaluated that (1) analysts’ earnings forecasts are upwardly biased; (2) simple forecasting techniques frequently outperform the analysts; and (3) investors incorporate the overoptimistic analysts’ forecasts into prices. Consequently, analysts’ earnings forecasts give rise to exploitable investment opportunities. This study provides insights into indentifying these opportunities and also highlights the extent to which these opportunities differ across countries.