The Study of Usefu
The Study of Usefulness of Different Earnings Forecast Models (Usefulness of Different Earnings Forecast Models by Management Compared to Earnings Forecast through Time Series Models)
Shahram1 Abdolahi, Saleh Hadinia2 and Hasan Babaei Koshteley3
1 M.Sc of Accounting, Department of Accounting, Science and Research Branch, Islamic Azad University and Auditor of Supreme Audit Court, Tehran, Iran.
2 (Corresponding Author), M.Sc of Accounting, Department of Accounting, Science and Research Branch, Islamic Azad University and Auditor of Supreme Audit Court, Tehran, Iran.
3 M.Sc of Mathematical, Department of Mathematical, Iran University of Science & Technology, Tehran, Iran.
Abstract: Earning forecast is of particular importance for investors, because it is considered an important factor in the stock assessment methods, and in most cases, it is an essential component of the stock selection methods. The importance of this forecast depends on its deviation from the reality. The less the deviation is, the more accurate the forecast will be and this is considered important for both users and suppliers. Having related and timely information, management tries to estimate the future earning so that it would attract the trust of users. In contrast, the investors can estimate future earnings using other methods such as time series models. This study compares the accuracy of the managers in forecasting the future earning with forecast of time series models. For this purpose, the forecasts of 19 companies, including 171 observations, were examined between 1999 and 2007. Considering the results of the sub-hypotheses, the result of the main hypothesis suggests that among the three used models, the best model to forecast with the least error in these companies was the moving average method. Also regarding the comparison of management earning forecast with time series forecasting methods, it was concluded that given that the two models out of three used quantitative models (time series model) forecast earnings with less error than the management forecast method. Thus, it can be said that management forecasts is more useful than time series methods. [Abdolahi, S., Hadinia, S., and Babaei, H. The Study of Usefulness of Different Earnings Forecast Models (Usefulness of Different Earnings Forecast Models by Management Compared to Earnings Forecast through Time Series Models). Life Sci J 2013;10(7s):225-232] (ISSN:1097-8135). http://www.lifesciencesite.com. 35
Keywords: Earnings Forecast, Management Earnings Forecasts, Earnings Forecasts Through, Time Series Models.