Forecasted Dispersion and the Cross Section of Expected Returns: What is the Driving Factor?
Most recent studies document that there is a negative relationship between analyst forecast dispersion and future stock returns. Analyst forecast dispersion consists of two components: the standard deviation of analyst forecasts in the numerator and the absolute value of mean analyst forecasts in the denominator. The economic interpretation is that analyst forecast dispersion represents differences of opinions. This interpretation is based on the numerator effect and treats the denominator effect as just a scalar. However, our results show that the predictability of analyst forecast dispersion on future stock returns is mainly contributed by the absolute value of mean forecasted earnings. Our findings suggest that future studies should not overstate the importance of standard deviation of analyst forecasts. Instead, they should pay more attention to the level of forecasted earnings.
Dispersion of analyst forecasts Standard deviation of analyst forecasts Absolute mean of analyst forecasts
Ling Cen K.C. John Wei Jie Zhang
Department of Finance Hong Kong University of Science and Technology Department of Finance, The Hong Kong University of Science and Technology, Clearwater Bay, Kowloon, School of Accounting and Finance Hong Kong Polytechnic University
国际会议
成都
英文
1-42
2007-07-09（万方平台首次上网日期，不代表论文的发表时间）