Modelling Analysts’ Target Price Revisions Following Good and Bad News?

Accounting and Business Research, Forthcoming

Posted: 12 Nov 2016 Last revised: 10 Dec 2016

See all articles by Tuan Quoc Ho

Tuan Quoc Ho

University of Bristol - School of Economics, Finance and Management

Norman C. Strong

University of Manchester - Alliance Manchester Business School

Martin Walker

University of Manchester - Manchester Business School

Date Written: October 5, 2016

Abstract

We study the relation between analysts’ target price revisions and recent market returns, excess stock returns, and other analysts’ target price revisions. Empirical results show that, after controlling for earnings forecast and recommendation revisions, target price revisions are associated with each of these information sources. We also find that target price revisions are more sensitive to negative than to positive excess stock returns. We conjecture that firms’ tendency to withhold bad news, while releasing good news promptly, drives this effect and, using proxies for firms’ withholding of bad news, we report evidence supporting this hypothesis.

Keywords: target price, excess stock returns, withholding bad news

JEL Classification: G24, M40

Suggested Citation

Ho, Tuan Quoc and Strong, Norman Charles and Walker, Martin, Modelling Analysts’ Target Price Revisions Following Good and Bad News? (October 5, 2016). Accounting and Business Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2868146

Tuan Quoc Ho (Contact Author)

University of Bristol - School of Economics, Finance and Management ( email )

University of Bristol,
Senate House, Tyndall Avenue
Bristol, BS8 ITH
United Kingdom

Norman Charles Strong

University of Manchester - Alliance Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Martin Walker

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

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