EconPapers    
Economics at your fingertips  
 

Analysts’ Forecasts and Asset Pricing: A Survey

S.P. Kothari (), Eric So () and Rodrigo Verdi ()
Additional contact information
S.P. Kothari: Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139
Eric So: Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139
Rodrigo Verdi: Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139

Annual Review of Financial Economics, 2016, vol. 8, issue 1, 197-219

Abstract: 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.

Keywords: information intermediary; mispricing; anomalies; disclosure (search for similar items in EconPapers)
JEL-codes: G10 G11 G12 G14 M40 M41 (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (48)

Downloads: (external link)
http://www.annualreviews.org/doi/10.1146/annurev-financial-121415-032930 (application/pdf)
Full text downloads are only available to subscribers. Visit the abstract page for more information.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:anr:refeco:v:8:y:2016:p:197-219

Ordering information: This journal article can be ordered from
http://www.annualreviews.org/action/ecommerce

Access Statistics for this article

More articles in Annual Review of Financial Economics from Annual Reviews Annual Reviews 4139 El Camino Way Palo Alto, CA 94306, USA.
Bibliographic data for series maintained by http://www.annualreviews.org ().

 
Page updated 2024-10-17
Handle: RePEc:anr:refeco:v:8:y:2016:p:197-219