Do financial analysts providing long-horizon forecasts accurately forecast near-term earnings?

This study investigates whether financial analysts who provide long-horizon earnings forecasts are able to accurately forecast near-term earnings. We find that the accuracy of near-term earnings forecasts decreases as analysts’ forecast horizons extend, suggesting the existence of a trade-off between forecast horizon and near-term forecast accuracy. However, this negative association decreases when analysts have greater forecasting experience or cover a larger number of firms. Furthermore, we identify a nonlinear relationship between forecast horizon and near-term forecast accuracy, indicating the existence of an optimal horizon at which near-term forecasts are most reliable. These findings provide new insights into the dynamics of analyst forecasting behavior and the implications of their long horizon outlooks for near-term forecast accuracy.