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Evaluating the properties of analysts’ forecasts: a bootstrap approach

Clatworthy, Mark A., Peel, David A. and Pope, Peter (2007) Evaluating the properties of analysts’ forecasts: a bootstrap approach. British Accounting Review, 39 (1). pp. 3-13. ISSN 0890-8389

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Identification Number: 10.1016/


Previous research has reported that analysts’ forecasts of company profits are both optimistically biased and inefficient. However, many prior studies have applied ordinary least-squares regression to data where heteroskedasticity and non-normality are common problems, potentially resulting in misleading inferences. Furthermore, most prior studies deflate earnings and forecasts in an attempt to correct for non-constant error variances, often changing the specification of the underlying regression equation. We describe and employ the wild bootstrap—a technique that is robust both to heteroskedasticity and non-normality—to assess the reliability of prior studies of analysts’ forecasts. Based on a large sample of 23,283 firm years covering the period 1981–2002, our main results confirm the findings of prior research. Our results also suggest that deflation may not be a successful method of correcting for heteroskedasticity, providing a strong rationale for using the wild bootstrap in future work in this, and other areas of accounting and finance research.

Item Type: Article
Official URL:
Additional Information: © 2007 Elsevier
Divisions: Accounting
Subjects: H Social Sciences > HG Finance
JEL classification: G - Financial Economics > G3 - Corporate Finance and Governance
Date Deposited: 23 Oct 2013 13:09
Last Modified: 20 Apr 2021 02:05

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