Industry-level versus firm-level forecasts of long-term earnings growth

This study assesses whether industry-level forecasts of long-term earnings growth (LTG) are more accurate than firm-level LTG forecasts commonly employed in prior work. I find that industry-level forecasts of LTG are more accurate than (i) firm-level forecasts, (ii) the median I/B/E/S consensus analyst LTG forecast, (iii) a zero growth forecast, and (iv) an LTG forecast combining industry and firm information. Industry-level forecasts are more accurate than firm-level forecasts for firms experiencing extreme growth and firms with high earnings variability, and are less accurate for firms in the Decline life-cycle stage.