RE-EXAMINING ANALYST SUPERIORITY IN FORECASTING RESULTS OF PUBLICLY-TRADED BRAZILIAN COMPANIES

ABSTRACT

Purpose:

This research examines the superiority of analysts over random walk models in forecasting the results of publicly-traded Brazilian companies in the short and long term.

Originality/value:

The literature indicates the uncontested superiority of market analysts because of their temporal and informational advantages. However, recent international studies call for a re-evaluation of this superiority, indicating that, for certain company characteristics, and primarily for long-term estimates, the superiority of analysts is not confirmed.

Design/methodology/approach:

This work evaluates the profit forecasting of analysts and simple and growth random walk models over the short and long term over 2010-2015 for publicly traded Brazilian companies, using the information available for the period with annual intervals.

Findings:

The results indicate: 1. the greater forecasting accuracy of simple random walk models compared to the growth random walk models; and 2. the greater forecasting accuracy of random walk models overall, with analyst forecasts only being superior for cases with three months of lag. The evidence suggests the forecasting superiority of the random walk models when compared to the market analysts' forecasts. The results suggest low efficiency of the forecasts of market analysts for the forecast of future results of publicly traded Brazilian companies in the analyzed period.

KEYWORDS
Earnings per share; Superiority of analysts; Market analysts; Time-series models; Random walk