Investor Target Prices
62 Pages Posted: 21 Aug 2017 Last revised: 30 Aug 2018
Date Written: August 16, 2017
We argue that investors have a target price in mind for the stocks that they own; once a stock exceeds that target price, investors are satisfied and more likely to sell the stock. This increased willingness to sell can generate a price drift after news announcements. Consistent with our argument, using analyst-target-price forecasts as a proxy, we provide evidence that the fraction of shareholders satisfied captures the post-earnings announcement drift. This pattern is stronger for stocks with low institutional ownership and high uncertainty. Stocks with a high fraction of shareholders satisfied experience stronger selling pressure around announcements.
Keywords: Investor Target Price, Fraction of Investors Satisfied, Price Drift
JEL Classification: G11, G12, G14
Suggested Citation: Suggested Citation