REPORTING OF MANAGEMENT FORECASTS: AN EIGENVECTOR MODEL FOR ELICITATION AND REVIEW OF FORECASTS

Increasingly, business firms will be disclosing management forecasts in financial reports to investors. Single estimates based on a consensus view (e.g., Delphi estimates) may be used. It seems logical, however, to consider methods that seek formally to derive internally consistent subjective views regarding the sensitivity of assumptions and interacting events on forecasts. The major purpose of this paper is to extend micro-level cross-impact analysis to a macro-level eigenvalue analysis approach that elicits views of the effects of assumptions and interaction events on entire scenarios. Both methods are illustrated and contrasted. They are complementary rather than alternative methods. In particular, each method offers some potential in the development of operational guidelines for elicitation and reporting of management forecasts. In addition, the eigenvalue analysis offers several key advantages that make it potentially useful in preparing entire scenario forecasts.