Identifying Factors Consistently Related to Value Line Earnings Predictability

Abstract

Abstract Earnings predictability can affect investment decisions and stock prices. An important source of earnings forecasts for a wide variety of empirical studies has been the Value Line Investment Survey. The purpose of this study is to identify factors that consistently account for cross‐sectional differences in Value Line earnings predict‐ability. A multivariate model consisting of four company variables and a set of industry indicator variables is used to evaluate the intertemporal consistency of factors related to earnings predictability. Quarterly and annual forecasts are used to measure earnings forecast accuracy. The results by year indicate that one factor, earnings variability, is consistently related to earnings predict‐ability.

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