Do analysts anchor on public signals in forecasting the target price of disruptive technology firms?

Marcus Caylor, Duanping Hong, Hyungshin Park and Hong Qu

Economics Letters, 2023, vol. 228, issue C

Abstract: Public signals serve as an anchor for higher order beliefs when forecasting stock price, a target that is determined by the average beliefs of investors. We predict that the anchoring effect is particularly strong when forecasting the stock price of disruptive technology firms, a fundamentally ambiguous target. Consistent with this prediction, we find that analysts’ price forecasts revisions are more responsive to earnings news for disruptive than non-disruptive technology firms. In contrast, this differential responsiveness does not exist for earnings forecasts, as earnings realizations do not depend on the average beliefs of investors.

Keywords: Disruptive technology; Valuation; Analyst forecasts; Anchoring; Higher order beliefs (search for similar items in EconPapers)
JEL-codes: G10 G14 G40 G41 M41 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:228:y:2023:i:c:s0165176523002082

DOI: 10.1016/j.econlet.2023.111183

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