Do Growth Expectations Help Explain Characteristic-Sorted Portfolio Returns?

36 Pages Posted: 26 Sep 2019

See all articles by Gregg S. Fisher

Gregg S. Fisher

Fisher Family Ventures

Ronnie Shah

Deutsche Bank; University of Texas at Austin - Department of Finance

Sheridan Titman

University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)

Date Written: September 15, 2019

Abstract

We find that accounting ratios (asset and sales growth, profitability, and equity dilution) that predict stock returns are associated with errors in analyst long-term growth forecasts. Specifically, accounting information that is associated with favorable long-term growth forecasts tends to predict negative analyst forecast errors and negative future excess returns. This and other evidence we present is consistent with the idea that biased long-term growth forecasts generate the observed return premia of popular characteristic-sorted portfolios.

Keywords: Analysts, Forecasts, Growth Expectations, Profitability,

Suggested Citation

Fisher, Gregg S. and Shah, Ronnie and Titman, Sheridan, Do Growth Expectations Help Explain Characteristic-Sorted Portfolio Returns? (September 15, 2019). Available at SSRN: https://ssrn.com/abstract=3454934 or http://dx.doi.org/10.2139/ssrn.3454934

Gregg S. Fisher

Fisher Family Ventures ( email )

1120 Avenue of the Americas, 4th Floor
New York, NY 10036
United States
2127960707 (Phone)

HOME PAGE: http://www.fisherfamilyventures.com

Ronnie Shah (Contact Author)

Deutsche Bank ( email )

60 Wall St
New York, NY 10017
United States

HOME PAGE: http://www.db.com

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States

Sheridan Titman

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-232-2787 (Phone)
512-471-5073 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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