Economics at your fingertips  

Earnings information, arbitrage constraints, and the forecast dispersion anomaly

Soonho Kim and Haejung Na

Finance Research Letters, 2020, vol. 35, issue C

Abstract: This study investigates the effect of managerial discretionary activities on the anomalous negative relation between analyst forecast dispersion and future stock returns. Our results show that higher discretionary earnings and lower nondiscretionary earnings amplify the analyst dispersion anomaly and suggest that investors follow analysts’ overly optimistic forecasts for firms with higher discretionary earnings and overprice them. Moreover, this relation is more prevalent in subsamples with more severe arbitrage constraints. Such results indicate that higher discretionary earnings, as managerial opportunistic behaviors, are associated with overvaluation in high dispersion stocks.

Keywords: Analyst forecast dispersion; Discretionary accruals; Discretionary earnings; Nondiscretionary earnings; Overvaluation; Arbitrage constraints (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

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:

DOI: 10.1016/

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Haili He ().

Page updated 2020-06-24
Handle: RePEc:eee:finlet:v:35:y:2020:i:c:s1544612319301898