Expert forecasts are based on the subjective assessments of individuals who are expert in particular fields. We know that no one analyst is likely to continually produce accurate forecasts

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Comment on the following statement: 'Expert forecasts are based on the subjective assessments of individuals who are expert in particular fields. We know that no one analyst is likely to continually produce accurate forecasts'.

Solution:

These forecasts are made by experts in the specific fields. Hence, they are based on the subjective assessments of individuals. We know that no one analyst is likely to continually produce accurate forecasts.

However, we also know that errors in an individual analyst’s forecasts can wash out in a sample. Indeed, research has shown that consensus analysts’ earnings forecasts are more accurate than individual analyst forecasts.

Thus, many investors rely upon consensus forecasts; that is, the average or median values ascribed to variables from groups of analysts.

 

Bench Partner
Oct 9, 2021

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