Long-Term Earnings Growth Forecasts, Limited Attention, and Return Predictability
Long-term earnings expectations are critically important to stock price valuations. We identify relative optimism and relative pessimism in long-term analyst forecasts by comparing these forecasts with implied short-term earnings growth forecasts across rms within the same industry. Stocks with rela...
Saved in:
| Main Authors: | , |
|---|---|
| Format: | text |
| Language: | English |
| Published: |
Institutional Knowledge at Singapore Management University
2010
|
| Subjects: | |
| Online Access: | https://ink.library.smu.edu.sg/lkcsb_research/1564 https://ink.library.smu.edu.sg/context/lkcsb_research/article/2563/viewcontent/WarachkaMLongTermEarnings.pdf |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| Institution: | Singapore Management University |
| Language: | English |
| Summary: | Long-term earnings expectations are critically important to stock price valuations. We identify relative optimism and relative pessimism in long-term analyst forecasts by comparing these forecasts with implied short-term earnings growth forecasts across rms within the same industry. Stocks with relatively optimistic and relatively pessimistic long-term analyst forecasts have negative and positive risk-adjusted returns, respectively. This return predictability depends critically on short-term forecasts since relative optimism and relative pessimism originate from the slow diffusion of information from short-term to long-term analyst forecasts. Our results indicate that market participants have limited attention regarding the long-term earnings implications of information. |
|---|