A re-examination of analysts' differential target price forecasting ability
Fontaine, Patrice; Roger, Tristan (2020), A re-examination of analysts' differential target price forecasting ability, Finance, 41, 1, p. 53-95
TypeArticle accepté pour publication ou publié
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Abstract (EN)Previous studies find persistent differences in target price accuracy and argue that financial analysts possess differential abilities to forecast stock prices. We first show that persistent differences in accuracy across analysts are driven by the characteristics of the firms the analysts follow. Those who cover easier-to-forecast firms appear more accurate. We then control for firm-characteristics by using alternative measures of target price performance. We introduce a new measure of target price forecast quality and we adapt two relative measures of accuracy from the earnings forecast literature. We then apply five different statistical tests of persistence to each measure of performance. In contrast with the previous literature, we do not find convincing evidence of differential target price forecasting abilities across analysts.
Subjects / KeywordsFinancial analysts; Target prices; Forecasting abilities; Expected accuracy; Persistence of volatility
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