Dispersion in analysts' earnings forecasts and credit rating

• 成果类型: Article
• 署名作者: Avramov, Doron; Chordia, Tarun; Jostova, Gergana; Philipov, Alexander
• 署名单位: George Washington University; University System of Maryland; University of Maryland College Park; Emory University; George Mason University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2008.02.005
• 发表日期: 2009
• 页码: 83-101
• 关键词: Credit rating; dispersion; Asset pricing anomalies; Financial distress

摘要

This paper shows that the puzzling negative cross-sectional relation between dispersion in analysts' earnings forecasts and future stock returns may be explained by financial distress, as proxied by credit rating downgrades. Focusing on a sample of firms rated by Standard & Poor's (S&P), we show that the profitability of dispersion-based trading strategies concentrates in a small number of the worst-rated firms and is significant only during periods of deteriorating credit conditions. In such periods, the negative dispersion-return relation emerges as low-rated firms experience substantial price drop along with considerable increase in forecast dispersion. Moreover, even for this small universe of worst-rated firms, the dispersion-return relation is non-existent when either the dispersion measure or return is adjusted by credit risk. The results are robust to previously proposed explanations for the dispersion effect such as short-sale constraints and leverage. (C) 2008 Elsevier B.V. All rights reserved.