Target Price Accuracy

BuR Business Research Journal, Vol. 1, No. 1, pp. 74-96, March 2011

23 Pages Posted: 14 Apr 2011

See all articles by Alexander Gabriel Kerl

Alexander Gabriel Kerl

University of Giessen - Department of Financial Services

Date Written: April 1, 2011

Abstract

This study analyzes the accuracy of forecasted target prices within analysts’ reports. We compute a measure for target price forecast accuracy that evaluates the ability of analysts to exactly forecast the ex-ante (unknown) 12-month stock price. Furthermore, we determine factors that explain this accuracy. Target price accuracy is negatively related to analyst-specific optimism and stock-specific risk (measured by volatility and price-to-book ratio). However, target price accuracy is positively related to the level of detail of each report, company size and the reputation of the investment bank. The potential conflicts of interests between an analyst and a covered company do not bias forecast accuracy.

Keywords: analyst report, conflicts of interest, efficient capital markets, equity analysis, financial report, forecast accuracy, forecast deviation, information content, security analysis, target prices

Suggested Citation

Kerl, Alexander Gabriel, Target Price Accuracy (April 1, 2011). BuR Business Research Journal, Vol. 1, No. 1, pp. 74-96, March 2011. Available at SSRN: https://ssrn.com/abstract=1806927

Alexander Gabriel Kerl (Contact Author)

University of Giessen - Department of Financial Services ( email )

Licher Str, 74
Giessen, 35394
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
382
Abstract Views
1,898
rank
76,711
PlumX Metrics