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Implications of Past Forecasting Errors Often Underestimated
When managers issue a forecast of their firm’s earnings, they do not always take into account prior forecasting errors, according to research in the current issue of the Journal of Business Finance & Accounting.
Weihong Xu, assistant professor of accounting in the University at Buffalo School of Management, analyzed more than 11,000 firm-quarter observations. She found that managers often underestimate the implications of their past forecasting errors when forecasting earnings.
This underestimation of past errors can affect how the market responds to a new earnings forecast. Specifically, it can contribute to “post-earnings announcement drift;” that is, stock prices continue to drift in the direction of the initial price response to an earnings announcement.
“Managers underestimate the information in their prior forecast errors to a greater extent when they make earnings forecasts with a longer horizon,” Xu says. Read the rest of this entry »
Straightening messy correlations with a quantum comb
Posted by wideant in Quantum Physics on March 2, 2010
Quantum computing promises ultra-fast communication, computation and more powerful ways to encrypt sensitive information. But trying to use quantum states as carriers of information is an extremely delicate business. Now two physicists have shown, mathematically, how to gently tease out unwanted knots in quantum communication, while keeping the information intact. Their work is reported in the current issue of Physical Review Letters and highlighted with a Viewpoint in Physics.
When two particles are entangled, they effectively act as a single entity, even though they might be on opposite ends of the galaxy. Physicists can code information into particles to make quantum bits, or qubits, then entangle the qubits in an orderly fashion to form an entangled bit, or ebit. Ebits can then be used to create incredibly tough codes or teleport information between two distant systems. But messy entanglements among particles make qubits more susceptible to losing their encoded information. Read the rest of this entry »
Spotting evidence of directed percolation
Posted by wideant in General Physics on March 2, 2010
A team of physicists has, for the first time, seen convincing experimental evidence for directed percolation, a phenomenon that turns up in computer models of the ways diseases spread through a population or how water soaks through loose soil. Their observation strengthens the case for directed percolation’s relevance to real systems, and lends new vigor to long-standing theories about how it works. Their experiment is reported in Physical Review E and highlighted with a Viewpoint in the November 16 issue of Physics.
While directed percolation models are handy for describing things as diverse as sand flow and calcium dynamics in cells, no one had managed to find clear, reproducible evidence of the phenomenon in a controlled experiment. Read the rest of this entry »