Do Sell-Side Analysts Exhibit Differential Target Price Forecasting Ability?

43 Pages Posted: 20 Apr 2005 Last revised: 7 Dec 2014

See all articles by Mark T Bradshaw

Mark T Bradshaw

Boston College

Lawrence D. Brown

Temple University - Department of Accounting

Kelly Huang

Florida International University

Multiple version iconThere are 2 versions of this paper

Date Written: April 1, 2012

Abstract

We examine the overall and individual analyst performance of 12-month-ahead target price forecasts over the 10-years, 2000-2009. Implied target price-based returns exceed actual returns by an average of 15%, and absolute target price forecast errors average 45%. At the end of the 12-month forecast horizon, only 38% of target prices are met, but 64% are met at some time during the forecast horizon. We find statistically significant but economically weak evidence of persistent differential abilities by sell-side analysts to forecast target prices. Target price announcement period return analyses indicate no differential market reactions to analysts’ target price revisions conditional on their recent target price forecast performance, consistent with the market understanding that analysts have at best limited abilities to persistently provide accurate target price forecasts.

Keywords: Analysts, Target Prices, Earnings Forecasts, Valuation

JEL Classification: E37, G10, G24, G29

Suggested Citation

Bradshaw, Mark T and Brown, Lawrence D. and Huang, Kelly, Do Sell-Side Analysts Exhibit Differential Target Price Forecasting Ability? (April 1, 2012). Available at SSRN: https://ssrn.com/abstract=698581 or http://dx.doi.org/10.2139/ssrn.698581

Mark T Bradshaw (Contact Author)

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Lawrence D. Brown

Temple University - Department of Accounting ( email )

Philadelphia, PA 19122
United States

Kelly Huang

Florida International University ( email )

11200 SW 8th Street
Miami, FL 33199
United States

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