Featured Research

from universities, journals, and other organizations

Implications Of Past Forecasting Errors Often Underestimated

Date:
November 11, 2009
Source:
University at Buffalo
Summary:
When managers issue a forecast of their firm's earnings, they do not always take into account prior forecasting errors, according to new research.

When managers issue a forecast of their firm's earnings, they do not always take into account prior forecasting errors, according to research in the current issue of the Journal of Business Finance & Accounting.

Related Articles


Weihong Xu, assistant professor of accounting in the University at Buffalo School of Management, analyzed more than 11,000 firm-quarter observations. She found that managers often underestimate the implications of their past forecasting errors when forecasting earnings.

This underestimation of past errors can affect how the market responds to a new earnings forecast. Specifically, it can contribute to "post-earnings announcement drift;" that is, stock prices continue to drift in the direction of the initial price response to an earnings announcement.

"Managers underestimate the information in their prior forecast errors to a greater extent when they make earnings forecasts with a longer horizon," Xu says.

She notes that further study is needed to see if the underestimation is intentional on the part of management in order to provide biased forecasts.


Story Source:

The above story is based on materials provided by University at Buffalo. Note: Materials may be edited for content and length.


Journal Reference:

  1. Weihong Xu. Evidence That Management Earnings Forecasts Do Not Fully Incorporate Information in Prior Forecast Errors. Journal of Business Finance & Accounting, 2009; 36 (7-8): 822 DOI: 10.1111/j.1468-5957.2009.02152.x

Cite This Page:

University at Buffalo. "Implications Of Past Forecasting Errors Often Underestimated." ScienceDaily. ScienceDaily, 11 November 2009. <www.sciencedaily.com/releases/2009/11/091110112444.htm>.
University at Buffalo. (2009, November 11). Implications Of Past Forecasting Errors Often Underestimated. ScienceDaily. Retrieved March 31, 2015 from www.sciencedaily.com/releases/2009/11/091110112444.htm
University at Buffalo. "Implications Of Past Forecasting Errors Often Underestimated." ScienceDaily. www.sciencedaily.com/releases/2009/11/091110112444.htm (accessed March 31, 2015).

Share This


More From ScienceDaily



More Science & Society News

Tuesday, March 31, 2015

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Models in Masks Highlight Indonesian Environmental Devastation

Models in Masks Highlight Indonesian Environmental Devastation

AFP (Mar. 31, 2015) — Wearing gas masks and designer dresses, models condemn the fashion industry&apos;s role in causing environmental devastation. Duration: 00:40 Video provided by AFP
Powered by NewsLook.com
The Future Of Japanese Whaling: Heritage Vs. Conservation

The Future Of Japanese Whaling: Heritage Vs. Conservation

Newsy (Mar. 30, 2015) — In 2014, the International Court of Justice ruled Japan could no longer engage in whaling in the Antarctic, but Japan has plans to return this year. Video provided by Newsy
Powered by NewsLook.com
Soda, Salt and Sugar: The Next Generation of Taxes

Soda, Salt and Sugar: The Next Generation of Taxes

Washington Post (Mar. 30, 2015) — Denisa Livingston, a health advocate for the Dinι Community Advocacy Alliance, and the Post&apos;s Abby Phillip discuss efforts around the country to make unhealthy food choices hurt your wallet as much as your waistline. Video provided by Washington Post
Powered by NewsLook.com
UnitedHealth Buys Catamaran

UnitedHealth Buys Catamaran

Reuters - Business Video Online (Mar. 30, 2015) — The $12.8 billion merger will combine the U.S.&apos; third and fourth largest pharmacy benefit managers. Analysts say smaller PBMs could also merge. Fred Katayama reports. Video provided by Reuters
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
 
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:  

Breaking News:

Strange & Offbeat Stories

 

Science & Society

Business & Industry

Education & Learning

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:  

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile iPhone Android Web
Follow Facebook Twitter Google+
Subscribe RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins