Discussion of 'Comprehensive Income Reporting and Analysts' Valuation Judgments.'

Article Abstract:

Hirst and Hopkins (1998) demonstrated that the calculation and display of comprehensive income (CI) in the presences of earnings management influence the judgements of financial statement users. In their study, they compared stock price judgments of buy-side financial analysts presented with financial statements made before the Statement of Financial Accounting Standards No 130 with stock price judgments of analysts given income statement display of comprehensive income. The researchers were able to discern a difference in the judgments made under two conditions. However, commentators opined that this variation may not be due to processability and cited three possible explanatory factors. The difference may be due not only to a lack of knowledge and processability but also to items in the income statement.

Income Accounting, Corporation reports, Company reports, Stock price forecasting

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The effect of forecast redundancy on judgments of a consensus forecast's expected accuracy

Article Abstract:

The effect of redundancy in multiple individual forecasts on a decision maker's perception of the accuracy of a consensus forecast was researched. Redundancy is a positive correlation of errors among individual forecasts, and statistically, it is postulated that a consensus forecast's accuracy is the result of the individual forecasts' accuracy, which is measured by the variance of forecast errors, and the correlation of forecasts' errors. Research results indicate that the judgements of decision makers as to the accuracy of a consensus forecast is influenced by the amount of redundancy among the individual forecasts' that make up the consensus forecast.

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Discussion of forecast redundancy on judgments of a consensus forecast's expected accuracy

Article Abstract:

Laureen A. Maines (1990) researched the effect of redundancy among individual forecasts making up a consensus forecast on the perceptions of accuracy of the consensus forecast by decision-makers. The external validity of Maines study are qualified by three major assumptions: consensus forecasts are created from the average of individual forecasts; a quadratic loss function is used by decision makers using forecasts; and accuracy and redundancy are discrete independent variables in real environments where consensus forecasts are used. An area for further research would be the reasons for high correlations of errors among the individual forecasts.

Maines, Laureen A.

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