The best of all possible worlds: unraveling target price optimism using analysts' scenario-based valuations

• 成果类型: Article
• 署名作者: Joos, Peter R.; Piotroski, Joseph D.
• 署名单位: INSEAD Business School; Stanford University
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-017-9413-3
• 发表日期: 2017
• 页码: 1492-1540
• 关键词: expected stock returns; EARNINGS FORECASTS; conditional skewness; Investor sentiment; empirical-analysis; equity analysts; RISK; recommendations; expectations; accuracy

摘要

We document that the relative placement of analysts' target price within their subjective distribution of scenario-based valuations for the covered firm (i.e., tilt) is informative to investors. When analysts forecast price appreciation, tilt incrementally predicts ex post valuation errors and realized returns; the predictive value of tilt disappears when analysts forecast price declines. In additional analyses, we find that tilt appears to reflect an optimistic bias in target price forecasts as opposed to information about asymmetric state-contingent risk payoffs. Finally, we document that investors can use estimates of implied tilt based on observable firm characteristics to distinguish between investments with equally optimistic target price forecasts, yet lacking scenario-based information.