An Empirical Analysis of Analysts' Target Prices: Short-term Informativeness and Long-term Dynamics

Authors: Brav A.¹; Lehavy R.¹

Source: The Journal of Finance, Volume 58, Number 5, October 2003 , pp. 1933-1968(36)

Publisher: Blackwell Publishing

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Abstract:

Using a large database of analysts' target prices issued over the period 1997–1999, we examine short-term market reactions to target price revisions and long-term comovement of target and stock prices. We find a significant market reaction to the information contained in analysts' target prices, both unconditionally and conditional on contemporaneously issued stock recommendation and earnings forecast revisions. Using a cointegration approach, we analyze the long-term behavior of market and target prices. We find that, on average, the one-year-ahead target price is 28 percent higher than the current market price.

Document Type: Research article

DOI: 10.1111/1540-6261.00593

Affiliations: 1: Duke University

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