If you read the job descriptions of equity analysts, you’d think the job consists of a lot of number crunching and analysis to come up with the best possible forecasts for a company’s future earnings and share price.
Sorry for the noob question ( I don't work in finance), when is a price forecast useful? When it is correct on the direction or when it is accurate? Or both? And by how much are the American price forecasts typically off? I imagine this is outside the scope of the paper but what about the Indian or Australian stock market, same things there?
Price forecasts are typically no better than change even for something as simple as the direction of change. That is the case everywhere in the world. A forecast is useful if it is better than a random walk in terms of forecast error.
Was there any breakdown between buy side and sell side analysts?
This was aa study only with sell side analysts.
Thank you
Sorry for the noob question ( I don't work in finance), when is a price forecast useful? When it is correct on the direction or when it is accurate? Or both? And by how much are the American price forecasts typically off? I imagine this is outside the scope of the paper but what about the Indian or Australian stock market, same things there?
Price forecasts are typically no better than change even for something as simple as the direction of change. That is the case everywhere in the world. A forecast is useful if it is better than a random walk in terms of forecast error.
Begs the question; why does the industry keep paying so much attention to it? Still the best tool they have available to them?
1. It makes for good stories to push stocks.
2. The number of competitor products is really hard to measure. There is a database in the US but outside the US there is no data that I know of.