Date of Graduation
7-2015
Document Type
Dissertation
Degree Name
Doctor of Philosophy in Business Administration (PhD)
Degree Level
Graduate
Department
Accounting
Advisor/Mentor
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.
Citation
Anderson, B. C. (2015). Do Analysts Understand Momentum? Evidence from Target Prices. Graduate Theses and Dissertations Retrieved from https://scholarworks.uark.edu/etd/1214