In the paper, we only use historical accounting data and no forecasts. The reason is that there is ample evidence that forecasts cannot be relied on. For example, in his excellent book, ‘The New Contrarian Investment Strategy’, David Dreman mentioned a study that used a sample of 67.375 analysts' quarterly estimates for companies listed on US stock exchanges.

The study found that the average analysts’ error was 40% and that the estimates were misleading two-thirds of the time! A less important but not insignificant factor is that historical accounting data is also cheaper.