Analyst dispersion stock returns
higher forecast dispersion in a stock) at time t, the more analysts will be forced to revise their forecast downward in the next period, i.e., at time t + 1 and, hence, the higher the stock return volatility at time t + 1 . As a result, there should be a high cor-relation between current analysts' forecast dispersion and future stock return volatility. dispersion in analysts’ earnings forecasts on future stock returns mainly comes from the denominator effect rather than from the numerator effect of the dispersion measure. We also find that dispersion in analysts’ earnings forecasts has the strongest predictive power among the most undervalued stocks. Using analyst forecast dispersion as a proxy for investors’ differing beliefs, I examine the variable’s relationship with future stock returns and future stock return volatility. In addition to constructing the typically used dispersion measure which utilizes analysts’ earnings forecasts, I also incorporate a novel dispersion measure based on revenue forecasts into the analysis. There is a puzzling negative cross-sectional relation between dispersion in analysts’ earnings forecasts and future stock returns. In particular, Diether, Malloy, and Scherbina (2002) (henceforth DMS) show that the trading strategy of buying low dispersion stocks and selling high dispersion stocks yields statistically significant and economically large payoffs over a period of one to three months. and stock returns provides contradictory results based on the use of di erence proxies. Diether, Malloy, and Scherbina (2002) document a negative relation between dispersion in analysts’ forecasts and future stock returns and conclude that the results reject the interpretation of dispersion in analysts’ forecasts as a measure of risk. In finance and investing, dispersion usually refers to the range of possible returns on an investment, but it can also be used to measure the risk inherent in a particular security or investment
principal finding in the papers cited above that future returns are low for stocks with high dispersion among analysts' earnings forecasts. We examine whether
FORECAST DIVERGENCE, TRADING VOLUME, AND STOCK RETURNS 265 dispersion, we find that the HVRP is concentrated in stocks wit h the smallest analyst forecast dispersion. This is surprising since these are the firms with the least pre-existing heterogeneity. The zero i nvestment portfolio of these stocks generates 44 basis points per month, or 5.28% Dispersion in Analysts’ Target Prices and Stock Returns. Abstract We propose the dispersion in analysts’ target prices as a new measure of disagreement among stock analysts. We document a signi cant positive relation between the target price dispersion and future stock returns for horizons up to 24 months. association between analysts’ forecast dispersion and future stock return is manifested in firms with lower magnitude of analysts’ dispersion and firms that are small size. This result, However, contrary to the differences-of-opinion explanation, our results show that the predictability of dispersion in analysts' earnings forecasts on future stock returns mainly comes from the In this paper, we examine the relationship between analysts' forecast dispersion and future stock return volatility using monthly data for a cross section of 160 US firms from 1981 to 1996. In this thesis, I investigate the predictive power of analyst forecast dispersion in terms of future stock performance. Using analyst forecast dispersion as a proxy for investors’ differing beliefs, I examine the variable’s relationship with future stock returns and future stock return volatility.
In this paper, we explain the negative relationship between analysts' forecast dispersion and future stock return, commonly known as the dispersion effect, as a
Keyword: Analyst, target price, dispersion, stock return, risk with the view that the dispersion in analysts' earnings forecasts is a proxy for differences in. (2002) and Johnson (2004) demonstrate that investors overvalue stocks with high dispersion in analysts' forecasts, which leads to lower future stock returns. These
Recent research establishes a negative relation between stock returns and dispersion of analysts' earnings forecasts, arguing that, due to short-sale constraints
We find that relative to low-dispersion stocks, high- dispersion stocks' predicted returns are more negatively associated with prior stock returns and prior forecast
higher forecast dispersion in a stock) at time t, the more analysts will be forced to revise their forecast downward in the next period, i.e., at time t + 1 and, hence, the higher the stock return volatility at time t + 1 . As a result, there should be a high cor-relation between current analysts' forecast dispersion and future stock return volatility.
ABSTRACT: Financial analysts' forecast dispersion has been used in a variety of Capital Estimates as Predictors of Accounting Returns and Stock Returns. Recent research establishes a negative relation between stock returns and dispersion of analysts' earnings forecasts, arguing that, due to short-sale constraints 24 Sep 2010 stocks according to their target price implied expected return (TPER) analyst's target price forecast (Dispersion) when a stock is in Portfolio 1 28 Mar 2010 market disagreement top-down using analyst forecast dispersion of S&P 500 annual earnings per share (EPS). It is not so straightforward, 8 Dec 2019 of other corporate communications for earnings and stock returns, in 10-K and 10-Q filings are associated with less dispersion in analysts'. strong inefficient so that stock returns are predictable based on public information like stock illiquidity and the dispersion of analysts' earnings forecasts.
24 Feb 2017 I expect the slope of a firm's dispersion term structure to be negatively related to its future abnormal stock returns because the earnings tion of analysts' earnings forecasts enhances the profitability of post–earnings announcement dispersion and stock return volatility (Zhang 2006), we docu-. 12 May 2017 The twentieth century witnessed exponential growth in equity capital As such, we develop a market-wide analyst forecast dispersion for each Garfinkel J, Sokobin J. Volume, opinion divergence, and returns: A study of