Analysts and Anomalies

46 Pages Posted: 23 Mar 2017 Last revised: 4 Apr 2019

See all articles by Joseph Engelberg

Joseph Engelberg

University of California, San Diego (UCSD) - Rady School of Management

R. David McLean

Georgetown University - Department of Finance

Jeffrey Pontiff

Boston College - Department of Finance

Date Written: April 3, 2019

Abstract

Analysts’ price targets and recommendations contradict stock return anomaly variables. Using an index based on 125 anomalies, we find that analysts’ annual stock return forecasts are 14% higher for anomaly-shorts than for anomaly-longs. Anomaly-shorts’ return forecasts are excessively optimistic, exceeding realized returns by 36%. Recommendations also tend to be more favorable for anomaly-shorts, although this result varies across anomaly types. Consistent with analysts’ slowly incorporating anomaly information, anomalies forecast revisions in both price targets and recommendations. Our findings imply that investors who follow analyst-actionable information contribute to mispricing.

Keywords: Anomalies, Analysts, Market Efficiency

Suggested Citation

Engelberg, Joseph and McLean, R. David and Pontiff, Jeffrey, Analysts and Anomalies (April 3, 2019). Available at SSRN: https://ssrn.com/abstract=2939174 or http://dx.doi.org/10.2139/ssrn.2939174

Joseph Engelberg

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

R. David McLean (Contact Author)

Georgetown University - Department of Finance ( email )

3700 O Street, NW
Washington, DC Washington DC 20057
United States

Jeffrey Pontiff

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
962
rank
22,195
Abstract Views
3,735
PlumX Metrics