Abstract

http://ssrn.com/abstract=1107637
 
 

References (37)



 


 



Long-Term Earnings Growth Forecasts, Limited Attention, and Return Predictability


Zhi Da


University of Notre Dame - Mendoza College of Business

Mitch Warachka


University of San Diego

January 1, 2009

AFA 2010 Atlanta Meetings Paper

Abstract:     
Long-term earnings expectations are critically important to stock price valuations. We identify relative optimism and relative pessimism in long-term analyst forecasts by comparing these forecasts with implied short-term earnings growth forecasts across firms within the same industry. Stocks with relatively optimistic and relatively pessimistic long-term analyst forecasts have negative and positive risk-adjusted returns, respectively. This return predictability depends critically on short-term forecasts since relative optimism and relative pessimism originate from the slow diffusion of information from short-term to long-term analyst forecasts. Our results indicate that market participants have limited attention regarding the long-term earnings implications of information.

Number of Pages in PDF File: 36

Keywords: Analyst Forecasts, Limited Attention, Return Predictability

JEL Classification: G12, G14


Open PDF in Browser Download This Paper

Date posted: March 19, 2008 ; Last revised: March 17, 2009

Suggested Citation

Da, Zhi and Warachka, Mitch, Long-Term Earnings Growth Forecasts, Limited Attention, and Return Predictability (January 1, 2009). AFA 2010 Atlanta Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1107637 or http://dx.doi.org/10.2139/ssrn.1107637

Contact Information

Zhi Da
University of Notre Dame - Mendoza College of Business ( email )
Notre Dame, IN 46556-5646
United States
Mitch Warachka (Contact Author)
University of San Diego ( email )
5998 Alcala Park
University of San Diego
San Diego, CA 92110-2492
United States
Feedback to SSRN


Paper statistics
Abstract Views: 3,139
Downloads: 720
Download Rank: 22,697
References:  37

© 2016 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollobot1 in 0.390 seconds