Recent literature has used analysts' earnings forecasts, which are known to be optimistic, to estimate implied expected rates of return; yielding upwardly biased estimates. We estimate that the bias, computed as the difference between the estimates of the implied expected rate of return based on...

We use the k-nearest neighbors (i.e., k-NN) algorithm to forecast a firm’s annual earnings by matching its recent trend in annual earnings to historical earnings sequences of “neighbor” firms. Our forecasts are more accurate than forecasts obtained from the random walk, the regression...

Sales and profit margins are two popular earnings components discussed in the media. We study properties of one-year-ahead analyst forecasts of these two components. As sales are in dollar amounts and profit margin is a ratio, we propose robust statistical methods to assess and contrast their...

Sloan (1996), Richardson et al. (2005, 2006) examine how firms' accruals relate to subsequent financial performance. They identify a negative correlation and attribute it to accruals lack of reliability. This paper considers the issue from a different starting point: we forecast sales and...