Investor Target Prices

62 Pages Posted: 21 Aug 2017 Last revised: 30 Aug 2018

Shiyang Huang

The University of Hong Kong - School of Economics and Finance

Xin Liu

University of Bath

Chengxi (Adam) Yin

Renmin University of China

Date Written: August 16, 2017

Abstract

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

Huang, Shiyang and Liu, Xin and Yin, Chengxi (Adam), Investor Target Prices (August 16, 2017). Available at SSRN: https://ssrn.com/abstract=3020000 or http://dx.doi.org/10.2139/ssrn.3020000

Shiyang Huang (Contact Author)

The University of Hong Kong - School of Economics and Finance ( email )

8th Floor Kennedy Town Centre
23 Belcher's Street
Kennedy Town
Hong Kong

Xin Liu

University of Bath ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

Chengxi Yin

Renmin University of China ( email )

59 Zhongguancun Street
Beijing
China

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