Do Financial Analysts Form Forecasts Rational?

Liu, Yang (2008) Do Financial Analysts Form Forecasts Rational? [Dissertation (University of Nottingham only)] (Unpublished)

[img] PDF - Repository staff only - Requires a PDF viewer such as GSview, Xpdf or Adobe Acrobat Reader
Download (599kB)


Most prior studies test analysts earnings forecast based on different assumptions of loss function. Under ordinary least squares (OLS) regression, prior studies find that financial analysts do not incorporate information rationally when they form their earnings forecasts. Some empirical studies argue that financial analysts tend to minimize the mean of forecasts errors, and then they actually face a linear loss function. Under least absolute deviation (LAD) regression, there is no strong evidence that analysts forecasts economically irrationality incorporate information when they form earnings forecasts. This paper test the rational expectation hypothesis on earnings forecast using under both OLS regression and LAD regression. The findings in this dissertation suggest that under the OLS regression, analysts forecasts are irrational that consistent with prior studies. However, the evidence of economically rational is found under the LAD regression tests.

Item Type: Dissertation (University of Nottingham only)
Depositing User: EP, Services
Date Deposited: 26 Sep 2008
Last Modified: 11 Jan 2018 10:32

Actions (Archive Staff Only)

Edit View Edit View