Investor target prices

Shiyang Huang, Xin Liu and Chengxi Yin

Journal of Empirical Finance, 2019, vol. 54, issue C, 39-57

Abstract: We argue that investors have target prices as anchors for the stocks that they own; once a stock exceeds target prices, investors are satisfied and more likely to sell the stock. This increased selling can generate a price drift after good news. Consistent with our argument, using analyst-target-price forecasts as a proxy, we provide evidence that the fraction of satisfied investors generates the post-earnings-announcement drift, and stocks with a high fraction of satisfied investors experience stronger selling around announcements. This pattern is stronger for stocks with low institutional ownership and high uncertainty.

Keywords: Investor target price; Fraction of satisfied investors; Price drift; Forward-looking anchor; Delayed adjustment (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:54:y:2019:i:c:p:39-57

DOI: 10.1016/j.jempfin.2019.07.009

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