In forecasting future cash flows and corporate earnings financial analysts often use a topdown approachExplain the motivation why academic research has turned to the model-basedforecasts of earnings i

Academic research has turned to model-based forecasts of earnings in recent years because they offer several advantages over traditional methods. Firstly, model-based forecasts are based on statistical models that take into account a wide range of economic and financial variables, which can provide a more accurate and comprehensive view of the factors that affect corporate earnings. This can help to identify trends and patterns that may not be apparent using traditional methods.

Secondly, model-based forecasts are often more transparent and objective than traditional methods. They are based on a set of clearly defined assumptions and calculations, which can be easily replicated and tested by other researchers. This can help to reduce the potential for bias and errors in the forecasting process.

Finally, model-based forecasts can be more flexible and adaptable than traditional methods. They can be updated and revised quickly in response to changing market conditions or new information, which can help to improve the accuracy and reliability of the forecasts.

Overall, the motivation for using model-based forecasts of earnings is to provide a more accurate, transparent, and flexible approach to forecasting future cash flows and corporate earnings, which can help investors and financial analysts make more informed investment decisions