Question: An analyst forecasts corporate earnings, and her record is evaluated by comparing actual earnings with predicted earnings. Define the following: actual earnings = predicted earnings

An analyst forecasts corporate earnings, and her record is evaluated by comparing actual earnings with predicted earnings. Define the following:
actual earnings = predicted earnings + forecast error.
If the predicted earnings and forecast error are independent of each other, show that the variance of predicted earnings is less than the variance of actual earnings.

Step by Step Solution

★★★★★

3.45 Rating (165 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Given that the variance of both predicted earnings and forec... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

488-M-S-C-R-V (506).docx

120 KBs Word File

Students Have Also Explored These Related Statistics Questions!

The two cases described below are independent of each other. Each case provides the information necessary to prepare the stockholders equity section of a corporate balance sheet. a. Early in 2009,...

The two cases described as follows are independent of each other. Each case provides the information necessary to prepare the stockholders' equity section of a corporate balance sheet. a. Early in...

The situations presented here are independent of each other. Instructions For each situation, prepare the appropriate journal entry for the redemption of the bonds. (a) Martha Corporation retired...

5.82 An analyst forecasts corporate earnings, and her record is evaluated by comparing actual earnings with predicted earnings. Define the following: actual earnings = predicted earnings + forecast...

will thumbs up Harmon Foods, Inc. John MacIntyre, general sales manager of the Breakfast Foods Division of Harmon Foods, Inc., was having difficulty in forecasting the sales of Treat. Treat was a...

Once you have read the article ?Comparing the Accuracy and Explainability of Dividend, Free Cash Flow, and Abnormal Earnings Equity Value Estimates?, review and complete the questions below. Use the...

MBA 520 Module Six Forecasting Model Questions The questions that follow and the article Comparing the Accuracy and Explainability of Dividend, Free Cash Flow, and Abnormal Earnings Equity Value...

The article below file Comparing the Accuracy and Explainability of Dividend in the module resources will aid in your understanding of forecasting models to find the best way possible to determine...

1. From the scenario, cite your forecasting conclusions that support TFC?s decision to expand to the West Coast market. Speculate as to whether or not the agency conflict discussed in the scenario...

When considering the future performance of a company, financial analysts often use forecasts for earnings per share (EPS). Naturally, we are interested in the quality of these forecasts. We can...

During April, Department A started 400,000 units of product in a particular production process. The beginning work in process inventory was 40,000 units, and the ending inventory was 50,000 units....

For the conditions of Exercise 17, determine the probability that boy A will hit the target before boy B does.

43. LO.5 Mary, a U.S. citizen, is the sole shareholder of CanCo, a Canadian corporation. During its first year of operations, CanCo earns $14 million of foreign-source taxable income, pays $6 million...

24. In fact, analysts who hope to forecast____________ future financial results accurately must apply and set aside genuinely____________ .

In exercise 4, the following estimated regression equation relating sales to inventory investment and advertising expenditures was given. y = 25 + 10x1 + 8x2 The data used to develop the model came...

In exercise 1, the following estimated regression equation based on 10 observations was presented. y = 29.1270 + .5906x1 + .4980x2 a. Develop a point estimate of the mean value of y when x1 = 180 and...

One-Way ANOVA A researcher wants to know if the time of day that a test is taken affects critical thinking ability. Factor (IV) = Time of Day DV = correct answers on a critical thinking abilities...

Not sure how to complete these different journal entries . 11. Suppose your company has one employee that earns a salary of $6,100 per month and another employee that earned hourly wages that totaled...

Reed Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures, Direct materials (16 lbs. @ $4 per lb.) Direct labor (4 hrs. @ $15 per hr.)...