Research on the factors affecting the earning per share (EPS) forecast accuracy

Abstract

Securities analysts play a vital role in alleviating the asymmetric information in the capital market, through collecting, processing and transmitting information via their expertise. As profit forecasting is gradually beneficial for investors to make decision, increasing number of researchers concentrate on profit forecasting to find out the factors affecting the earning per share (EPS) forecast accuracy. In common, there are three main aspects to influence the EPS forecast accuracy: personal ability of analysts, difficulty of the task and broker size. Since there are still lots of controversies on the influence of broker size on forecast error, this essay will focus on examining broke size by univariate analysis and multivariate analysis with the sample of U.S. automobile industry from 2001 to 2009. This essay hypothesizes that analysts employed by large brokers produce more accurate earnings forecasts than analysts employed by smaller brokers. The results of my article can support my hypothesis.