The forecast dispersion anomaly revisited: Time-series forecast dispersion and the cross-section of stock returns

Dongcheol Kim and Haejung Na

Journal of Empirical Finance, 2016, vol. 39, issue PA, 37-53

Abstract: Previous studies use cross-sectional forecast dispersion in examining the relation between forecast dispersion and future stock returns and report an anomalous negative dispersion-return relation. This paper examines how time-series forecast dispersion is distinct in the relation to stock returns from the negative dispersion-return relation. We find that contrary to the previously-known negative dispersion-return relation, there is a strong positive relation between time-series forecast dispersion and stock returns. We also find that time-series forecast dispersion apparently contains systematic risk components and that such risk is priced in stock returns.

Keywords: Time-series forecast dispersion; Cross-sectional forecast dispersion; Analysts' earnings forecasts; Systematic risk components; Idiosyncratic volatility; Macroeconomic conditions (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:39:y:2016:i:pa:p:37-53

DOI: 10.1016/j.jempfin.2016.09.003

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