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20 Analysts Are Two Times Better Than Five

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20 #Analysts Are Two Times Better Than Five #ChartOfTheDay

 

  • According to vox populi (wisdom of crowds) theory, more guesses should make consensus estimates more accurate
  • With analysts forecast earnings, it holds true for up to 30 analysts as forecast error is reduced with increased analyst coverage
  • However, for companies with more than 30 analysts covering it, accuracy starts to deteriorate
  • This shows that more analyst estimates only improve consensus estimate accuracy to a point

 

Full paper available for free at SSRN.

 

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Posted in Chart of the Day