Can Securities Analysts Forecast Intangible Firms’ Earnings?

Posted: 6 Dec 2011

See all articles by Huong N. Higgins

Huong N. Higgins

Worcester Polytechnic Institute - School of Business

Date Written: August 11, 2011

Abstract

This paper assesses the performance of securities analysts in forecasting the future earnings of intangible firms. The assessment is relative to extrapolative time-series models of earnings forecasts. The paper’s results show that the forecast errors produced by both analysts and extrapolative models are positively associated with intangibles that are above the industry norm, consistent with the difficulty of processing complex intangible information. However, the impact of intangibles on extrapolative models’ forecast errors is stronger than on analysts’. This finding is consistent with analysts’ better ability relative to extrapolative models to forecast the earnings of intangible firms, and with analysts’ ability to process intangible information.

Keywords: financial analysts, earnings forecasts, intangible assets, information complexity, time series

JEL Classification: M40, M41

Suggested Citation

Higgins, Huong N., Can Securities Analysts Forecast Intangible Firms’ Earnings? (August 11, 2011). Available at SSRN: https://ssrn.com/abstract=1968457 or http://dx.doi.org/10.2139/ssrn.1968457

Huong N. Higgins (Contact Author)

Worcester Polytechnic Institute - School of Business ( email )

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Worcester, MA 01609
United States
508-831-5626 (Phone)
508-831-5720 (Fax)

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