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The Measurement of Analysts’ Earnings Forecast Uncertainty

DOI: 10.4236/me.2015.64041, PP. 430-435

Keywords: Analysts’ Earnings Forecast, Measurement, Uncertainty

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Abstract:

Analysts’ earnings forecast began in the early 20th century in America, researchers and investors are especially interested in estimating uncertainty about future earnings, because it reveals important characteristics of the firm’s information prior to the release of accounting results. Since uncertainty is inherently unobservable, evaluating its estimates poses challenging methodological problems. As a result, researchers have put forward alternative proxies for earnings forecast uncertainty. Here, we will review the measurement used in the study of foreign scholars of analysts’ earnings forecast uncertainty, and make a comparison among various methods. Considering the background of information, prediction model and analysts cannot be expected to know the cause of the situation, GARCH as an ex ante measure, will be one of the most accurately measures of uncertainty. Studying the methods of analysts’ earnings forecast uncertainty will be conducive to market participants to understand the characteristics of analysts’ earnings forecast, so as to make more rational decisions.

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