Analysts’ Forecasts and Asset Pricing: A Survey
This survey reviews the literature on sell-side analysts’ forecasts and their implications for asset pricing. We review the literature on the supply and demand forces shaping analysts’ forecasting decisions as well as on the implications of the information they produce for both the cash flow and the...
| Main Authors: | , , |
|---|---|
| Other Authors: | |
| Format: | Article |
| Language: | en_US |
| Published: |
Annual Reviews
2017
|
| Online Access: | http://hdl.handle.net/1721.1/111079 https://orcid.org/0000-0003-1120-1177 https://orcid.org/0000-0002-9345-2123 https://orcid.org/0000-0003-1231-7374 |
| _version_ | 1826203613189373952 |
|---|---|
| author | Kothari, S. P. So, Eric Verdi, Rodrigo |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Kothari, S. P. So, Eric Verdi, Rodrigo |
| author_sort | Kothari, S. P. |
| collection | MIT |
| description | This survey reviews the literature on sell-side analysts’ forecasts and their implications for asset pricing. We review the literature on the supply and demand forces shaping analysts’ forecasting decisions as well as on the implications of the information they produce for both the cash flow and the discount rate components of security returns. Analysts’ forecasts bring prices in line with the expectations they embody, consistent with the notion that they contain information about future cash flows. However, analysts’ forecasts exhibit predictable biases, and the market appears to underreact to the information in forecasts and to not fully filter the biases in forecasts. Analysts’ forecasts are also helpful in estimating expected returns on securities, but evidence on the relation between analysts’ forecasts and expected returns is still scarce. We conclude by identifying unanswered questions and offering suggestions for future research. |
| first_indexed | 2024-09-23T12:40:22Z |
| format | Article |
| id | mit-1721.1/111079 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T12:40:22Z |
| publishDate | 2017 |
| publisher | Annual Reviews |
| record_format | dspace |
| spelling | mit-1721.1/1110792022-09-28T09:21:32Z Analysts’ Forecasts and Asset Pricing: A Survey Kothari, S. P. So, Eric Verdi, Rodrigo Sloan School of Management Kothari, S. P. So, Eric Verdi, Rodrigo This survey reviews the literature on sell-side analysts’ forecasts and their implications for asset pricing. We review the literature on the supply and demand forces shaping analysts’ forecasting decisions as well as on the implications of the information they produce for both the cash flow and the discount rate components of security returns. Analysts’ forecasts bring prices in line with the expectations they embody, consistent with the notion that they contain information about future cash flows. However, analysts’ forecasts exhibit predictable biases, and the market appears to underreact to the information in forecasts and to not fully filter the biases in forecasts. Analysts’ forecasts are also helpful in estimating expected returns on securities, but evidence on the relation between analysts’ forecasts and expected returns is still scarce. We conclude by identifying unanswered questions and offering suggestions for future research. 2017-08-31T17:53:53Z 2017-08-31T17:53:53Z 2016-10 Article http://purl.org/eprint/type/JournalArticle 1941-1367 1941-1375 http://hdl.handle.net/1721.1/111079 Kothari, S.P. et al. “Analysts’ Forecasts and Asset Pricing: A Survey.” Annual Review of Financial Economics 8, 1 (October 2016): 197–219 © 2016 Annual Reviews https://orcid.org/0000-0003-1120-1177 https://orcid.org/0000-0002-9345-2123 https://orcid.org/0000-0003-1231-7374 en_US http://dx.doi.org/10.1146/annurev-financial-121415-032930 Annual Review of Financial Economics Creative Commons Attribution-Noncommercial-Share Alike http://creativecommons.org/licenses/by-nc-sa/4.0/ application/pdf Annual Reviews Shikha Sharma |
| spellingShingle | Kothari, S. P. So, Eric Verdi, Rodrigo Analysts’ Forecasts and Asset Pricing: A Survey |
| title | Analysts’ Forecasts and Asset Pricing: A Survey |
| title_full | Analysts’ Forecasts and Asset Pricing: A Survey |
| title_fullStr | Analysts’ Forecasts and Asset Pricing: A Survey |
| title_full_unstemmed | Analysts’ Forecasts and Asset Pricing: A Survey |
| title_short | Analysts’ Forecasts and Asset Pricing: A Survey |
| title_sort | analysts forecasts and asset pricing a survey |
| url | http://hdl.handle.net/1721.1/111079 https://orcid.org/0000-0003-1120-1177 https://orcid.org/0000-0002-9345-2123 https://orcid.org/0000-0003-1231-7374 |
| work_keys_str_mv | AT kotharisp analystsforecastsandassetpricingasurvey AT soeric analystsforecastsandassetpricingasurvey AT verdirodrigo analystsforecastsandassetpricingasurvey |