Model-based earnings forecasts vs. financial analysts' earnings forecasts

Richard D. F. Harris, Pengguo Wang

Research output: Contribution to journalArticle (Academic Journal)

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Existing accounting-based forecasting models of earnings either do not fully consider information that is contained in stock prices or use an ad hoc specification that is not based on rigorous valuation theory. In this paper, we develop an earnings forecasting model built on the theoretical linkages between future earnings and stock prices as well as a number of accounting fundamental variables. We find that our model-based forecasts of earnings are in general less biased and more accurate than both existing model-based forecasts and analysts' consensus forecasts, at both shorter and longer horizons. We also show that the accuracy of both model-based forecasts and financial analysts' forecasts depend on firm-specific characteristics such as firm size and industry membership.
Original languageEnglish
Pages (from-to)424-437
Number of pages14
JournalBritish Accounting Review
Issue number4
Early online date10 Oct 2018
Publication statusPublished - 1 Jun 2019



  • analysts' earnings forecasts
  • model-based earnings forecasts
  • forecast horizons
  • accuracy
  • incremental information
  • firm characteristics

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