By Brav A., Lehavy R.
Utilizing a wide database of analysts' aim costs issued over the interval 1997-1999, we research non permanent industry reactions to focus on cost revisions and long term comovement of objective and inventory prices.We ¢nd a signi¢cant marketplace response to the data contained in analysts' goal costs, either unconditionally and conditional on contemporaneously issued inventory suggestion and profits forecast revisions. utilizing a cointegration technique, we study the long term habit of marketplace and objective prices.We ¢nd that, on normal, the one-year-ahead aim fee is 28 percentage better than the present industry rate.
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Extra info for An Empirical Analysis of Analysts’ Target Prices: Short-term Informativeness and Long-term Dynamics
2000, How do analysts use their forecasts? Working paper, Harvard Business School. , 2002,The use of target prices to justify sell-side analysts’stock recommendations, Accounting Horizons 16, 27^ 41. Brav, Alon, and Paul A. Gompers, 1997, Myth or reality? The long-run underperformance of initial public o¡erings: Evidence from venture capital and nonventure capital-backed companies, Journal of Finance 52, 1791^1822. Brav, Alon, and J. B. Heaton, 2002, Competing theories of ¢nancial anomalies, Review of Financial Studies 15, 575 ^ 606.
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The regression results are consistent with the prediction that, controlling for earnings forecast and target price revisions, more-extreme revisions in stock An Empirical Analysis of Analysts’ Target Prices 1965 TableA1 The Role of Recommendation Revisions Variable a (Intercept) b (Earnings forecast revision) g (Target price revision) Adj. 3 887 recommendations are perceived as providing more-informative signals. 479). 088). When we consider recommendation downgrades in columns 4 ^ 6, we ¢nd results consistent with the hypothesis that the magnitude of a recommendation revision conveys independent information to market participants.