Published analysts’ earnings forecasts in Japan: how accurate are they?

Abstract

This paper examines the accuracy of analysts’ earnings forecasts in Japan and compares the results to those in the U.S. The Japanese forecasts are those reported by Toyo Keizai and the U.S. forecasts are those reported by IBES. Earnings forecasts for Japanese companies are more accurate than for U.S. firms; however, this better accuracy appears to result from Japanese earnings being easier to forecast, rather than from differential ability of analysts. Compared to naive random walk (no change) forecasts, analysts in the U.S. actually appear to provide more improvement in forecast accuracy than do analysts in Japan. This larger improvement in the U.S. may be related to the large number of analysts entering the U.S. consensus forecasts compared to the single analyst forecasts available in Japan.