Analyst Forecasting Errors: Additional Evidence

Analyst forecasting errors are approximately as large as Dreman and Berry (1995) documented, and an optimistic bias is evident for all years from 1985 through 1996. In contrast to their findings, I show that analyst forecasting errors and bias have decreased over time. Moreover, the optimistic bias in quarterly forecasts was absent for S&P 500 firms from 1993 through 1996. Analyst forecasting errors are smaller for (1) S&P 500 firms than for other firms; (2) firms with comparatively large amounts of market capitalization, absolute value of earnings forecast, and analyst following; and (3) firms in certain industries.