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Analysts' Forecasts in Asian-Pacific Markets: The Relationship Among Macroeconomic Factors, Accounting Systems, Bias and Accuracy

In this study, we describe determinants of accuracy/bias of analysts' forecasts in 13 economies of the Asian-Pacific region. Examination of the accuracy of analysts' earnings forecasts allows us to judge how accounting systems and macroeconomic distinctions in this region affect earnings predictability. As many investors rely on analysts' earnings forecasts instead of producing their own, the growth of international investment means forecasts in non-US markets will become increasingly important to investors worldwide. Using a sample of firms with data available on Global Vantage and I/B/E/S International, we find that the analysts on average have a pessimistic bias in Asian-Pacific markets. We examine whether macroeconomic factors explain part of the difference in the size of analyst forecast errors, using the global competitiveness rankings of the World Economic Forum (WEF). We expect that those nations which are more open to foreign trade and investment and are ranked more highly by the WEF in its Global Competitiveness Index will also have more accurate analyst forecasts, as increased global competitiveness demands greater integration into the world economy, and such integration should lead to more transparent financial statements and more accurate earnings forecasts. Our findings are consistent with this prediction. We also find that countries with low book-tax conformity have more accurate earnings forecasts.