Analysts’ Earnings Forecast, Recommendation,and Target Price Revisions

Stock return synchronicity and the market response to analyst recommendation revisions

“…Additional evidence of the informational value of analyst recommendations is provided by Barber et al (2010), Feldman, Livnat andZhang (2012), and Bradley, Clarke, Lee and Ornthanalai (2014) among others.…”

“…Based on the immediate price reactions to the three revision signals,Feldman et al (2012) conclude that changes in target prices and stock recommendations are on average relatively more informative than earnings forecast revisions.Accordingly, we repeat our cross-sectional regression analysis of recommendation revisions using target price revisions.We obtain all analyst forecasts of target prices from I/B/E/S issued during the 1999-2012 time period. 14 To determine whether analysts revise (upwards, downwards, or reiterate) their price forecasts we compare each target price forecast with the previous target price forecast issued by the same analyst for the same firm.…”

“…14 To determine whether analysts revise (upwards, downwards, or reiterate) their price forecasts we compare each target price forecast with the previous target price forecast issued by the same analyst for the same firm. Similar toFeldman et al (2012), we ensure that the prior forecast is not older than 365 days. Upgrades are defined as instances where the revision [(current target price forecast -prior target price forecast)/prior target price forecast] is greater than zero.…”

“…Feldman et al (2012) address the relative informativeness of revisions of earnings forecasts, target prices, and stock recommendations. Based on the immediate price reactions to the three revision signals,Feldman et al (2012) conclude that changes in target prices and stock recommendations are on average relatively more informative than earnings forecast revisions.Accordingly, we repeat our cross-sectional regression analysis of recommendation revisions using target price revisions.We obtain all analyst forecasts of target prices from I/B/E/S issued during the 1999-2012 time period.…”

Of leaders and followers—An econometric analysis of equity analysts and stock market investors

“…Other works demonstrating the presence of earnings forecast momentum based on self-financing portfolios include the extensive study on momentum strategies by Chan et al (1996), several studies of investment strategies based on consensus recommendations (e.g., by Barber, Lehavy, McNichols, & Trueman, 2001 or by Boni and Womack, 2006), and the study of portfolios built upon an earnings forecast revision ratio by Czaja et al (2013). Feldman, Livnat, and Zhang (2012) show that all three types of sell-side analyst output-recommendations, target prices, and earnings forecasts-significantly impact market prices and should be combined to further enhance forecast-based trading strategies.…”