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| Author: | Chung, H. Kim, J. |
| Title: | The use of multiple instruments for measurement of earnings forecast errors, firm size effect and the quality of analysts' forecast errors |
| Journal: | Journal of Business Finance and Accounting
1994 : JUL, VOL. 21:5, p. 707-727 |
| Index terms: | EARNINGS FORECASTING MEASUREMENT |
| Language: | eng |
| Abstract: | This paper develops an instrumental variables framework to form a better proxy for earnings forecast errors. The key aspect of the approach is to extract information from alternative proxies for the same underlying variable, namely a portion of realized earnings signals unexpected by the market. The authors use signs of various proxies for earnings forecast errors obtained from different time-series forecasting models as multiple instruments. The results show that the instrumental variables approach is effective for reducing measurement errors inherent in various proxies for earnings forecast errors. |
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