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March 18, 2026The Accounting Review

The Formation of Earnings Expectations.

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Authors

DGDan Givoly

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Overview

Analysis reveals rational formation of earnings forecasts in companies, suggesting model implications for accuracy.

Key Points

  • The research aims to analyze how financial analysts form forecasts of annual earnings based on historical data.
  • Examine over 6,000 earnings forecasts from a period of 11 years
  • Conduct time-series tests on the forecasts
  • Utilize adaptive expectations model for analysis
  • Analysts' forecasts are rational and utilize past earnings information
  • Adaptive expectations model accurately describes earnings forecast formation
  • Adaptation coefficient varies across different companies and time periods
  • Mean forecasts and cross-sectional tests in prior studies reduce power but yield valid conclusions

Cite This Study

Dan Givoly (1985) studied this question.

synapsesocial.com/papers/69ba42bc4e9516ffd37a3521https://doi.org/10.2308/tar-4506699
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Also Consider

Synapse has enriched 5 closely related papers on similar clinical questions. Consider them for comparative context:

  1. 1Analysts' Forecasts.1991 · 12 citations
  2. 2An Evaluation of Security Analysts' Forecasts.1978 · 2 citations
  3. 3Analysts' Use of Information about Permanent and Transitory Earnings Components in Forecasting Annual EPS.1992 · 5 citations
  4. 4A Note on the Informational Content of Corporate Annual Earnings Forecasts.1978
  5. 5A Re‐Examination of Financial Analysts' Differential Earnings Forecast Accuracy*1997 · 78 citations