Macro-economic Modeling and Forecasting using aggregate Earnings and Management Earnings Forecasts

Abstract

Accounting earnings, as a comprehensive item, represent corporate performance. Furthermore, one of the main approaches in the voluntary disclosure researches is that earnings forecasts of firm managers as insiders with access to confidential information may be a timely indicator of current and future economic status of the firm. Therefore, this research is aimed to investigate whether total accounting income, including net or gross, beside some management disclosures like earnings forecast, is an indicator of economic variables like inflation rate or unemployment rate, or not? The sample includes 88 firms listed in the Tehran stock exchange during the years from 2006 to 2016 .To answer the research question, three models based on neural network, genetic algorithm, and particle swarm optimization algorithm are designed and their results are compared. Results indicate that using genetic and particle swarm optimization algorithm is an effective way in instruction of neural network. The results also indicate that total accounting income is accounted for as an effective indicator of economic variables. Overall, the findings emphasize the importance of accounting information in macroeconomic.

Keywords

• Unemployment rate
• Inflation Rate
• Artificial intelligence models