Title page
Contents
Abstract 2
I. Introduction 3
II. Composite S&P 500 Earnings, Forecast Revisions and Index Returns 6
III. A Macroeconomic Accounting Model of Profit Growth 10
IV. Estimating Macroeconomic Drivers of S&P 500 Earnings Growth 11
V. Predicting Analyst Forecast Errors with Macro-Model Forecasts 17
VI. Predicting Stock Returns using Model-Analyst Forecast Gaps 21
VII. Summary and Conclusion 22
Table 1. Regressions of S&P 500 Excess Returns on Revisions to Bottom-Up Quarterly Forecasts, 1994-2023 25
Table 2. Regression of S&P 500 Earnings Growth on Macro Model Variables, 1993-2023 26
Table 3. Regression of S&P 500 Earnings Growth on Real GDP and Dollar Index, 1993-2023 27
Table 4. Correlations: Actual Growth, Analysts' Forecasts, and Model Forecasts, 1994-2023 28
Table 5. Regressions Predicting Analyst Forecast Errors Using Model-Analyst Forecast Gaps, 1994-2023 29
Table 6. Regressions Predicting S&P 500 3-Month Excess Returns using Model-Analyst Forecast Gaps, 1994-2023 30
Table 7. Regressions Predicting S&P 500 6-Month Excess Returns using Model-Analyst Forecast Gaps, 1994-2023 31
Table 8. Market-Timing Portfolios, 1994-2023 32
Figure 1. Growth in S&P 500 earnings versus Real GDP, quarterly rate 8
Figure 2.A. Iterated coefficient estimates: Full macro model 16
Figure 2.B. Iterated coefficient estimates: Full model with constraint 16
Figure 2.C. Iterated coefficient estimates: Simple Model 16
Figure 3. Cumulative two-quarter growth forecasts: Analysts vs. Models 20