The asymmetric mispricing information in analysts' target prices

• 成果类型: Article
• 署名作者: Green, Jeremiah; Hand, John R. M.; Sikochi, Anywhere
• 署名单位: Texas A&M University System; Texas A&M University College Station; University of North Carolina; University of North Carolina Chapel Hill; Harvard University
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-022-09730-z
• 发表日期: 2024
• 页码: 889-915
• 关键词: private information; empirical-analysis; management; valuation; forecasts; uncertainty; access; RISK

摘要

We study the mispricing information present in the target prices of US and international analysts. We hypothesize that asymmetry in the value-relevance of the information that managers supply to analysts, combined with asymmetry in the incentives facing analysts to curry favor with managers, leads to analyst-claimed undervaluation being more predictive of future stock returns than analyst-claimed overvaluation. Our empirical tests isolate analyst-claimed mispricing by first removing analysts' estimates of the cost of equity from the returns implied by target prices and then separating analyst-claimed undervaluation from overvaluation. We find that target prices only predict future returns (at 16 cents to 18 cents on the dollar) when analysts claim undervaluation, not when they claim overvaluation. We also observe that analyst-claimed undervaluation predicts future returns more strongly after firms experience low returns and when macro-driven valuation uncertainty is low.