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.
E-mail: [email protected].
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.
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Keywords: Earnings Forecast, Management
Earnings Forecasts, Earnings Forecasts Through, Time Series Models.
