We find that analyst forecasts of earnings per share occur in nickel intervals at a much greater frequency than do actual earnings per share. Analysts who round their earnings per share forecasts to nickel intervals exhibit characteristics of analysts who are less informed, exert less effort, and have fewer resources. Rounded forecasts are less accurate and the negative relation between rounding and forecast accuracy increases as the rounding interval increases from nickel to dime, quarter, half‐dollar, and dollar. An examination of announcement period returns reveals that market expectations more closely align with consensus forecasts including rounded forecasts and then correct toward the more accurate consensus forecasts excluding rounded forecasts. Finally, exclusion of rounded forecasts decreases forecast dispersion.
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1 July 2005
Research Article|
July 01 2005
Rounding of Analyst Forecasts
Wayne B. Thomas
Wayne B. Thomas
bUniversity of Oklahoma.
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Online ISSN: 1558-7967
Print ISSN: 0001-4826
American Accounting Association
2005
The Accounting Review (2005) 80 (3): 805–823.
Citation
Don Herrmann, Wayne B. Thomas; Rounding of Analyst Forecasts. The Accounting Review 1 July 2005; 80 (3): 805–823. https://doi.org/10.2308/accr.2005.80.3.805
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