TY - JOUR
T1 - Subjective valuation and target price accuracy
AU - Bonini, Stefano
AU - Capizzi, Vincenzo
AU - Kerl, Alexander
N1 - Publisher Copyright:
© 2022 World Scientific Publishing Co. Pte Ltd. All rights reserved.
PY - 2022/6/1
Y1 - 2022/6/1
N2 - In this paper, we analyze how subjective adjustments to baseline models by analysts affect the forecasting accuracy. For a panel of analyst reports, we show that target price forecasts that deviate signi cantly from simple multiple-based pseudo-Target prices are (ex-post) more accurate. By controlling for various stock and broker characteristics, we also demonstrate that our results are not driven by the degree of sophistication of the valuation models. Furthermore, we show that investors know about this increased informativeness of forecasts as the abnormal market return around target price revisions is significantly higher if analysts deviate from simple pseudo-Target prices when issuing their forecasts.
AB - In this paper, we analyze how subjective adjustments to baseline models by analysts affect the forecasting accuracy. For a panel of analyst reports, we show that target price forecasts that deviate signi cantly from simple multiple-based pseudo-Target prices are (ex-post) more accurate. By controlling for various stock and broker characteristics, we also demonstrate that our results are not driven by the degree of sophistication of the valuation models. Furthermore, we show that investors know about this increased informativeness of forecasts as the abnormal market return around target price revisions is significantly higher if analysts deviate from simple pseudo-Target prices when issuing their forecasts.
KW - Equity research
KW - Forecast accuracy
KW - Multiple valuation.
KW - Target prices
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U2 - 10.1142/S2282717X22500050
DO - 10.1142/S2282717X22500050
M3 - Article
AN - SCOPUS:85132347073
VL - 10
JO - Journal of Financial Management, Markets and Institutions
JF - Journal of Financial Management, Markets and Institutions
IS - 1
M1 - 2250005
ER -