Date of Graduation

7-2015

Document Type

Dissertation

Degree Name

Doctor of Philosophy in Business Administration (PhD)

Degree Level

Graduate

Department

Accounting

Advisor

James N. Myers

Committee Member

Linda A. Myers

Second Committee Member

Amy Farmer

Keywords

Social sciences; Accounting; Capital markets; Financial analysts; Target prices

Abstract

Target prices are analysts’ forecasts of a firm’s stock price. Although target prices can be used to help market participants make investment decisions, much is still unknown about how analysts make these forecasts. Because prior literature documents momentum in stock returns, in this paper, I examine whether target prices reflect the information in returns over the six months prior to the target price announcement date. I find that target prices systematically underestimate the persistence of these six month returns. I further find that the forecasted return in target price revisions is more pessimistic following periods of very good stock performance and more optimistic following periods of very poor stock performance. However, I find that target prices made by ‘All-Star’ analysts reflect the information in six month returns when these target prices follow a period of very poor stock performance.

Included in

Accounting Commons

Share

COinS