• ISSN: 2010-023X
    • Frequency: Bimonthly
    • DOI: 10.18178/IJTEF
    • Editor-in-Chief: Prof.Tung-Zong (Donald) Chang
    • Executive Editor: Ms. Cherry L. Chen
    • Abstracting/ Indexing: Engineering & Technology Digital Library, ProQuest, Crossref, Electronic Journals Library, DOAJ , EBSCO, and Ulrich's Periodicals Directory
    • E-mail: ijtef@ejournal.net
IJTEF 2011 Vol.2(5): 450-454 ISSN: 2010-023X
DOI: 10.7763/IJTEF.2011.V2.147

Do Macroeconomic Conditions Affect Firm-level Earnings Forecasts?

David C. Broadstock, Yan Shu, and Bing Xu
Abstract—We demonstrate the importance of including macroeconomic information when forecasting firms’ earnings. Taking Hou et al.’s (2010) cross-sectional model as the starting point for the analysis, we augment the model with three macroeconomic factors derived from a principal component analysis of more than 20 indicators. We find consistent evidence that macroeconomic conditions should be incorporated when predicting firms’ future earnings, and particularly in the early sample period, macroeconomic factors therefore enhance the predictive accuracy of the model.

Index Terms—Macroeconomic factors, earnings forecast, principal component analysis.

David C. Broadstock is with the Research Institute of Economics and Management at the Southwestern University of Finance and Economics, Chengdu, 610074 China (e-mail: davidbroadstock@swufe.edu.cn). He is also a associate member of the Surrey Energy Economics Centre based in the UK. Shu Yan (corresponding author) is with the Research Institute of Economics and Management at the Southwestern University of Finance and Economics, Chengdu, 610074 China (e-mail: shuyan@swufe.edu.cn).
Bing Xu is with the Research Institute of Economics and Management at the Southwestern University of Finance and Economics, Chengdu, 610074 China (e-mail: xubing@swufe.edu.cn).

[PDF]

Cite:David C. Broadstock, Yan Shu, and Bing Xu, "Do Macroeconomic Conditions Affect Firm-level Earnings Forecasts?," International Journal of Trade, Economics and Finance vol.2, no.5, pp. 450-454, 2011.

Copyright © 2008-2015. International Journal of Trade, Economics and Finance. All rights reserved.
E-mail: ijtef@ejournal.net