By Brav A., Lehavy R.
Utilizing a wide database of analysts' objective costs issued over the interval 1997-1999, we learn temporary marketplace reactions to focus on rate revisions and long term comovement of aim and inventory prices.We ¢nd a signi¢cant industry response to the knowledge contained in analysts' goal costs, either unconditionally and conditional on contemporaneously issued inventory suggestion and profits forecast revisions. utilizing a cointegration technique, we research the long term habit of industry and aim prices.We ¢nd that, on standard, the one-year-ahead objective cost is 28 percentage larger than the present marketplace cost.
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Additional info for An Empirical Analysis of Analysts’ Target Prices: Short-term Informativeness and Long-term Dynamics
Hold-to-buy relative to hold-to-strong buy), controlling for the information in both target price and earnings forecast revisions. We expect the magnitude of a recommendation revision to be informative even in the presence of target prices. For a given target price revision, the magnitude of the associated recommendation revision can provide additional information on an analyst’s level of con¢dence in that target price. For example, a positive revision in a target price could be perceived as more credible (or more precise) when accompanied by a revision from a hold to a strong buy rather than a revision from a hold to a buy recommendation.
Second, the evidence that target price revisions contain information regarding future abnormal returns is important and consistent with either market underreaction due to investor behavioral biases or rational learning in the face of structural uncertainty (Brav and Heaton (2002)). The evidence of such a ‘‘drift,’’ however interpreted, is also relevant to the current debate regarding the objectivity and unbiasedness of analyst reports. Our ¢ndings should serve as a starting point for further research on various related questions.
And Kenneth R. French, 1993, Common risk factors in the returns on stocks and bonds, Journal of Financial Economics 33, 3 ^56. Fama, Eugene, and J. MacBeth, 1973, Risk, return, and equilibrium: Empirical test, Journal of Political Economy 81, 607^ 636. Fernandez, Pablo, 2001,Valuation using multiples: How do analysts reach their conclusions? Working paper, IESE Business School. Francis, Jennifer, and L. So¡er, 1997,The relative informativeness of analysts’stock recommendations and earnings forecast revisions, Journal of Accounting Research 55, 193 ^211.
An Empirical Analysis of Analysts’ Target Prices: Short-term Informativeness and Long-term Dynamics by Brav A., Lehavy R.