CFA Practice Question

There are 201 practice questions for this study session.

CFA Practice Question

As of the end of December, 2011, quarterly consensus earnings forecast for a company was $1.25. For the 24 analysts covering the stock, the low forecast is $1.20 and the high is $1.45. The standard deviation of the forecasts is $0.05. If reported earnings come in $0.08 above the mean forecast, what is the earnings surprise for the firm, scaled to reflect the dispersion in analysts' forecasts?
A. 1.6
B. 5
C. 1.064
Explanation: $0.08/$0.05 = 1.6

User Contributed Comments 3

User Comment
SMcalister What is the 1.6 in reference to? How is it measured and does it have units?
sheridanla It has no unit. It tells how many standard deviations the reported earnings are from the forecast earnings.
daverco The formula in the text multiplies the standard deviation in the denominator by the earnings beat. This would make the result 20. Is there a reason not to do this, or is the explanation wrong?
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