Abstract
Brown, Richardson, and Schwager [1987] (henceforth BRS) find that the superior forecasting ability of analysts over time-series models is related to characteristics of a firm's information environment, namely, firm size (a measure of the dimensionality of the information set) and the dispersion in analysts' forecasts (a measure of the variance of information observations). This paper extends BRS by testing whether these characteristics are also related to analyst superiority as a proxy for the market's expectations for earnings. The empirical tests of association between abnormal returns and forecast errors examine whether the ex post weights placed on analyst and time-series model forecasts are consistent with investors weighting the two forecast sources based on their relative accuracy.' I find that analyst
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