A Study of Forecast Error and Covariant Time Series to Improve Forecasting for Financial Decision Making

Abstract

Earnings forecasts provide useful numerical information concerning the expectations of a firm's future prospects and indicate management's ability to anticipate a firms changing internal structure and external environment. The accuracy of these earnings forecasts that has been given so much attention is due to the S.E.C.'s position on financial forecasts and the issuance of the Statement of Position by the AICPA. These statements are important since they, in part, have motivated researchers to the importance of forecasting financial information. Consequently, if the disclosure of earnings forecasts in financial reports is permissable, the improvement of financial forecasts should be one of the primary concerns of the AICPA, the SEC, and numerous other interested groups.

Prioritizing the Recognition Pattern of Affecting Factors in Deviation of Forecasts of the Senior Managers in Organizations

“…Specifically, produced time series models may be as well as management forecasts. These results are similar to results of Elton and Gruber studies (Jarrett and Khumuwala, 1987).…”

“…He found out that management forecasts were more accurate than both group of analyst forecasts. Although, were not confirmed at statistically significant levels (Jarrett and Khumuwala, 1987). Gong et al (2009) examined the relationship between the management forecast error of revenues in the year after and accrual in the current year.…”

The Fuzzy Logic Method for Simpler Forecasting

“…Secondly, it is important because it impacts on forecast method selection. The method that produces the most accurate forecast across the forecast horizons 1-4 may well not be the method that produces the most accurate forecast over the forecast [1][2][3][4][5][6][7][8][9][10][11][12][13][14][15][16][17][18]. So, modelers should be certain that they select the model that will perform best for the forecast horizons of interest.…”

Methods for evaluating the value of intangible assets

“…The argument was that cash flow accuracy is expected to suffer from matching, realisation, and other timing problems concerning the timing of the recognition of costs and revenues. Accuracy of financial reports was studied by many including Brandon and Jarrett (1974), Jarrett (1983Jarrett ( , 1992, and Jarrett and Khumawala (1987). They compared methods of forecasting accounting earnings seeking to learn how forecast models can be compared and possibly improved to produce more-accurate results.…”