Determinants of Analyst Forecasting Accuracy

This paper examines recent trends in sell-side analyst forecast accuracy, with a particular focus on the industry of the firm being forecasted. Using median forecast data from 2000-2013 as provided by I/B/E/S, this study provides evidence indicating that forecast accuracy has been steadily decreasing over the sample period and that forecast dispersion has been steadily increasing. In addition, it finds that there are significant differences in forecast accuracy by industry. Finally, this study confirms the findings of prior research. Many of the factors found in prior studies as significant, remain significant even in the face of recent regulatory and economic changes. These factors include the size of the firm, the analyst coverage, the type of earnings and the change in earnings.