Betting against analyst target price

Han, C.; Kang, J.; Kim, S.

doi:10.1016/j.finmar.2021.100677

Betting against analyst target price

Han, C.; Kang, J.; Kim, S.

Authors

C. Han

J. Kang

S. Kim

Abstract

Using a robust measure that captures the market’s reaction to analysts’ target price releases, we show that the initial stock price reaction corresponds to target prices, but the price drifts in the opposite direction for a long period, resulting in negative crosssectional predictability. In the U.S. market from 1999 to 2002, the derived long-short portfolio generates a significant one-month ahead return of 0.75% and 10.00% over a year and possesses favorable features: its profit is higher among large and liquid stocks, originates from long positions, and lasts long. Empirical evidence suggests that the return reversal is caused by both discount rate shifts and mispricing correction following target price releases.

Citation

Han, C., Kang, J., & Kim, S. (2022). Betting against analyst target price. Journal of Financial Markets, 59(Part B), Article 100677. https://doi.org/10.1016/j.finmar.2021.100677

Journal Article Type	Article
Acceptance Date	Sep 23, 2021
Online Publication Date	Oct 14, 2021
Publication Date	2022-06
Deposit Date	Sep 28, 2021
Publicly Available Date	Oct 15, 2023
Journal	Journal of Financial Markets
Print ISSN	1386-4181
Publisher	Elsevier
Peer Reviewed	Peer Reviewed
Volume	59
Issue	Part B
Article Number	100677
DOI	https://doi.org/10.1016/j.finmar.2021.100677
Public URL	https://durham-repository.worktribe.com/output/1239016

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Publisher Licence URL
http://creativecommons.org/licenses/by-nc-nd/4.0/

Copyright Statement
© 2021 This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/